Preamble

The House met at half-past Two o'clock

PRAYERS

[MR. SPEAKER in the Chair]

Mr. Lever: I meant "justified any such expenditure" by the companies concerned. Of course, no circumstances justify corruption, and, if I may say so, the hon. Gentleman's supplementary question was a work of supererogation.

Mr. Dalyell: Will my right hon. Friend take it that those of us who represent constituencies where a good deal of the work is being done on oil-related ventures have increasing confidence in the way in which the State is handling the oil companies and in the relationship which they have established, but will he take somewhat further and a little more seriously the question raised by the hon. Member for Aberdeenshire, East (Mr. Henderson) and reflect on whether the time has come for the Government to spell out in some detail, perhaps in a White Paper, just how malleable and under what degree of mercy an independent Scottish Government would be at the hands of these oil companies? [Laughter.] It is not a laughing matter. They would be puppets

Mr. Lever: It is with regret that I have to exercise self-denial by telling my hon. Friend that his very pertinent question should correctly be addressed not to me but to the Lord President.

Oral Answers to Questions — PRICES AND CONSUMER PROTECTION

Retail Prices

Mr. Sainsbury: asked the Secretary of State for Prices and Consumer Protection what has been the increase in the Retail Price Index in the last three months.

Mr. Molloy: asked the Secretary of State for Prices and Consumer Protection what has been the rise in the Retail Price Index in the past two months.

Mr. Wakeham: asked the Secretary of State for Prices and Consumer Protection by what percentage the Index of Retail Prices has increased since February 1974.

The Secretary of State for Prices and Consumer Protection and Paymaster-General (Mrs. Shirley Williams): In the last two-monthly and three-monthly periods, the increases were 2·6 per cent. and 3·9 per cent. respectively. The Retail Price Index increased by 47·3 per cent. between February 1974 and February 1976, the latest month for which information is available.

Mr. Sainsbury: May I congratulate the right hon. Lady on her new appointment as Paymaster-General, which will enable her to personify the link between pay and prices? Does she recall that the Prime Minister spoke last week of the need for Ministers to tell the truth and explain the facts? In the light of the figures she has just given, will she reconsider her view that the rate of inflation

is not twice but only somewhat above that of our major competitors?

Mrs. Shirley Williams: I trust that I can rely on the Opposition not to give the impression that being Paymaster-General is the same as being "Minister for Pay", for otherwise, I suspect, I shall not last in that job for more than a few days.
The hon. Member for Gloucester (Mrs. Oppenheim) and the hon. Gentleman and I have had a certain amount of discussion about inflation. The broad position is as I have put it. The rate of inflation in this country is not more than twice that of the OECD countries as a whole, but if one picks out two or three leading industrial countries, it is.

Mr. Molloy: In view of the possible fruition of the Government's policy, can my right hon. Friend say whether there will be just as dramatic a fall in prices as there has been a dramatic rise over the past few years?

Mrs. Shirley Williams: In the past 12 months there has been a very dramatic fall in the rate of inflation on a six-monthly basis, which is the best way we can take it at present. I have every reason to think that this fall will continue for the next few months, which is as far ahead as I dare predict.

Mr. Wakeham: Does not the right hon. Lady agree that within the next month or so we shall be paying 50 per cent. more in the prices in the shops than we were paying when the Government took office? Have any other Government in this country presided over inflation at such a rate?

Mrs. Shirley Williams: The hon. Gentleman must be aware that there has been no precedent for a rate of inflation in the whole industrial world like that which has taken place since the rise in oil prices in 1973 and the commodity price boom which went with it. It is not helpful to the country nor to an understanding of our problems to pretend that this situation is unique to the United Kingdom, because it is not.

Mr. Greville Janner: Is my right hon. Friend aware that her new appointment has given very great pleasure to all of us on this side of the House, who are extremely pleased at the way in which


the rate of inflation has been reduced, and that we wish to congratulate her on the part she has played in that reduction?

Mrs. Shirley Williams: I thank my hon. and learned Friend, but it would be quite improper if I were not to say that a very great part of what we have been able to achieve in the counter-inflation policy has been due to the people of the country and not just to individual Ministers.

Mrs. Sally Oppenheim: Is the right hon. Lady aware that the Opposition wish to be associated with the warm congratulations offered to her? Is she further aware that in these days of "Women's Lib" we are reassured that she has not announced that she wants to be known as "Pay person-General"? But, however warm and sincere our congratulations on a personal level, they cannot be extended to the right hon. Lady's record on prices over the past two years.
Is the right hon. Lady aware that my hon. Friend the Member for Maldon (Mr. Wakeham) was making it clear that it was not Britain but the Government of whom he was speaking? Is it not disturbing that the rate of increase over the past three months is more than twice the average of our main competitors at a time when wage costs and raw material prices were quite stable? Since there has been a drastic reduction in the value of the pound, is the right hon. Lady still confidently predicting that price rises will have been brought to below 10 per cent. by the end of the year on the normally calculated basis?

Mrs. Shirley Williams: I toyed with the idea of being "Paymistress-General" but thought that it might be misunderstood.
I was arguing with the hon. Member for Maldon (Mr. Wakeham) that inflation in Britain, while we have never denied that it has been very acute, has not been uniquely British but part of a world problem in which our figures have been bad—we have never denied that. The Government are confident that there will be a further fall in the rate of inflation over the next few months. I cannot go beyond that because, as the hon. Lady will appreciate, none of us knows what the effect of commodity prices will be on the world upturn. I do not deny, either, that the decline in the value of the pound in recent

months will rather slow down the achievement of the target.

Sir George Young: asked the Secretary of State for Prices and Consumer Protection whether she will publish the percentage rise in retail prices from 1951 to 1964, from 1964 to 1970, from 1970 to 1973 and from February 1974 to the latest available date.

The Under-Secretary of State for Prices and Consumer Protection (Mr. Robert Maclennan): The figures corresponding to these periods are 54·8 per cent., 31·0 per cent., 28·0 per cent. and 47·3 per cent. respectively.

Sir G. Young: Will the Minister consider omitting from the RPI the cost of tobacco and cigarettes, as there are strong health and medical reasons for increasing their prices and the fact that these commodities are included in the RPI may prevent that?

Mr. Maclennan: The Retail Price Index is a long-established measure of prices of goods bought. It is a matter for my right hon. Friend the Secretary of State for Employment to consider the items in it, but for my part I think that it would be dangerous to do that to which the hon. Gentleman's Front Bench colleagues have drawn attention—fiddle with the RPI.

Mrs. Sally Oppenheim: Is the hon. Gentleman aware that I share his right hon. Friend's view that statistics covering a comparatively short period are not as reliable as those covering longer periods, and that the figures he has just given show that the rate of inflation has risen by the same amount during eight years of Labour Government as during 16 years of Conservative Government? Therefore, prices rise twice as fast under Labour Governments as under Conservative Governments.

Mr. Maclennan: The hon. Lady must be aware that since the war Labour Governments have followed Conservative Governments who have left us with legacies, such as the threshold of stage 3, for which her party must bear full responsibility. I agree with her that one should resist the temptation to be involved in captious quiddities about figures.

Consumer Protection

Miss Fookes: asked the Secretary of State for Prices and Consumer Protection what steps Her Majesty's Government are taking to strengthen consumer protection within the EEC.

Mr. Maclennan: We have played an active part in the preparation of the Community consumer protection and information programme and are participating fully in discussions on a number of proposals designed to benefit consumers throughout the Community. Officials of my Department have also recently met representatives of the Commission and of other member States to discuss priorities for the future.

Miss Fookes: What are those priorities?

Mr. Maclennan: In the Community they cover five basic areas—health and safety, economic interests, the redress of grievances, information and education, and representation. The Government have suggested that priority should be given to measures of the widest importance which make the best use of the Community's limited resources, including particularly measures to help reduce accidents in the home on a Community-wide approach, automatic means of labelling and pricing goods and the exchange of information on the best ways to collect and disseminate price information to consumers. However, we attach the highest importance to a strengthened role for the Consumer Consultative Committee.

Mr. Mike Thomas: Is my hon. Friend aware that I was pleased to join the hon. Lady the Member for Plymouth, Drake (Miss Fookes) at a meeting of parliamentarians in Brussels concerned with consumer problems a short time ago? Is he aware that we were appalled to learn that the number and amount of staff and resources within the Commission devoted to consumer problems were equivalent to just four full-time members and that the consumer viewpoint on the common agricultural policy appeared to be grotesquely under-represented? What is he doing about that?

Mr. Maclennan: I fully share my hon. Friend's views on this matter and his concern about the weakness of the staffing

and structure of the Consumer Consultative Committee. I particularly regret and deplore the Commission's failure to take full account of the Committee's representations before the ministerial meeting at which the common agricultural policy decisions were taken. We hope that during the coming year this position can be very much improved along the lines that my hon. Friend has suggested.

Mr. Marten: Is the hon. Gentleman aware that the forcible incorporation of dried skimmed milk into animal feeding stuffs will raise the cost of food? Has this had the permission of the Price Commission?

Mr. Maclennan: The hon. Member knows that that is a question for the Minister of Agriculture, but the arrangements are temporary and will all be reviewed.

Consumer Protection Officers (Powers)

Miss Boothroyd: asked the Secretary of State for Prices and Consumer Protection whether she will extend the powers of consumer protection officers to enable them to investigate allegations of excessive charges or unjustifiable price rises.

The Minister of State, Department of Prices and Consumer Protection (Mr. Alan Williams): Responsibility for investigating excessive charges or unjustifiable price rises rests with the Price Commission. But consumer advice centres and citizens' advice bureaux are the instruments for pursuing individual complaints. The role of consumer protection officers is to investigate misleading statements about prices.

Miss Boothroyd: I thank the Minister for his reply. Is he aware that many local officers are dissatisfied because of the restrictions on their duties and that they believe that they cannot investigate on-the-spot complaints and provide a complainant with a satisfactory reply? Would he agree that the attack on inflation could be made more effective and that complainants could be much better satisfied if authority were given to local officers to do these on-the-spot investigations and thereby give a response to the complainant?

Mr. Alan Williams: I should have thought that the Opposition when in government must have considered that point of view, as we have. But the trading standards officers are already working heavily in following through the consumer protection legislation which we recently passed. I have not received many representations from them for extra work. Indeed, if anything, their representations have been to the effect that they are now working pretty heavily. In any case, it could detract from their other work on the consumer protection front and overlap with the work of the Price Commission. I am therefore afraid that I can hold out no hope of such a change: I am sorry.

Food Subsidies

Mr. Peter Bottomley: asked the Secretary of State for Prices and Consumer Protection what estimate she has made of the saving per week, for a single person, as a result of the present level of food subsidies.

Mr. Maclennan: The average saving for for a single person living alone is estimated to be about 24p per week.

Mr. Bottomley: How temporary are the subsidies?

Mr. Maclennan: The programme for the future of subsidies has been set out in the Public Expenditure White Paper with a carefully-considered timeable for their reduction.

Mr. Gwilym Roberts: Would not my hon. Friend agree that it is now widely recognised on this side of the House that the food subsidies have had an important redistributive effect in helping the lower-paid sections of society? In those circumstances, would he ask our right hon. Friend to use her now much greater weight within the Cabinet to ensure some change in any policy which is aimed at cutting out these subsidies?

Mr. Maclennan: My hon. Friend is right to stress the redistributive benefit of food subsidies, although it is true that in the long run, if one wishes to achieve that end, it may be better to act directly through taxation and the social security system. But I am sympathetic to his view of the importance which should be attached to the future of the food subsidy

programme. The proposals for the future represent, I believe, the fastest possible rundown.

Mr. Norman Lamont: With reference to subsidised bread, does not the increase of lp on a standard 17p loaf mean that the price of bread has increased by 6 per cent. and that not even a subsidy has enabled it to remain within the Price Check Scheme? It is now outside.

Mr. Maclennan: The increase in the price of bread is due simply to a straight increase in the price of flour. The increase is not, however, 6 per cent., as the hon. Gentleman said. The Price Check Scheme permits a rounding up to the nearest coin in common use.

Mrs. Dunwoody: What estimate has my hon. Friend made of the increase in subsidies needed to keep pace with the price increases which will be brought about as the direct result of the CAP price review?

Mr. Maclennan: The Government's view is that it is appropriate to adhere to the general policy of relying increasingly upon social security benefits to meet the cost of inflation. My hon. Friend will be aware that last week the Secretary of State for Social Services announced the fourth such increase in the two years since this Government took office.

Mr. Lawrence: Further to the suggestion by the hon. Member for Cannock (Mr. Roberts), would the hon. Gentleman confirm or deny that it is this Government's policy to use food subsidies for the purpose of redistributing wealth?

Mr. Maclennan: The policy of food subsidies is redistributive; that is one of its merits and attractions to us.

Metrication

Mr. Giles Shaw: asked the Secretary of State for Prices and Consumer Protection what plans she has to keep the public informed of the problems created by metrication.

Mr. Alan Williams: When in government, the Opposition entered into international commitments to metricate and to allow the import of metric goods after a set date. To avoid confusion and unnecessary cost for consumers as a result of these commitments it is necessary to


complete the metrication programme in an orderly fashion. These possible problems could become more acute as increasing numbers of school leavers, trained primarily in the metric system, have to contend with the protracted use of a dual system in our shops and factories.

Mr. Shaw: I thank the Minister for that extraordinary answer. Would he not agree that the sudden withdrawal of an enabling Bill to metricate must add confusion to the public and particularly industry? When do the Government propose to re-table that measure—I hope with amendments that would make it passable in the House?

Mr. Alan Williams: If there is any confusion, the convolutions of the Opposition have not exactly helped. The policy was to enable us to do what was necessary to fulfil their obligations in an orderly fashion. It seems to me—I make this point genuinely, whether the House wishes to believe it or not—that we should at least try, on what has been a consensus policy for the last 10 years, to explore how far consensus can be re-established. That means consensus with the consumer organisations, which have been overwhelmingly in support of changing Section 10(10) of the Weights and Measures Act 1963, and with the trade. I have had meetings and have invited the Opposition to meet me also.

Mr. Dalyell: Have the Government seen the proposals of the Retail Consortium that there should be a statutory timetable, in consultation with retailers?

Mr. Alan Williams: I am grateful to my hon. Friend for drawing that to the attention of the House. I had a meeting with the Retail Consortium only last week. It is clearly understood that, while the Consortium is no more enthusiastic about metrication than probably any of us as individuals, it recognises the inevitability of the situation, the fact that voluntariness has now virtually reached its end and the fact that we shall now have to try to organise the completion of the metrication programme. I am grateful to the Consortium for at least presenting the problems as it sees them.

Mrs. Sally Oppenheim: Will the Minister please answer these questions in a more honest fashion and say that this

country was committed to metrication in the first place in 1965 by a Labour Government and that the consensus followed later about the actual principle of metrication? Will he urge the new Leader of the House to make parliamentary time available so that the confusion can be ended and the Government can put their plans to the House for consideration before they present a Bill?

Mr. Alan Williams: I should like to think that the hon. Lady will on reflection choose, at least on a personal level, to withdraw her comment about honesty, because I found it somewhat surprising. No one has tried to pretend that metrication was not started in 1965 at the request of the Confederation of British industry. It was immediately supported by Opposition spokesmen in the House of Lords when it was debated there. When it was debated here and I was sitting where the hon. Lady is now, despite the fact that there was political mischief to be done and political capital to be made if one wished to be cheap enough, I retained tht consensus approach. What is more, I have extended a courtesy which was never extended to me when I was in opposition: I have had Opposition spokesmen in to see me on several occasions for off-the-record discussions and briefings. I have indicated to them that the Section 10(10) change was coming about. No indication was given by the Opposition that they would table a completely negative amendment. Indeed, the hon. Member for Kingston-upon-Thames (Mr. Lamont) has on a number of occasions asked when we would bring in Section 10(10).

Mr. Skinner: Does my hon. Friend realise that throughout all this argument there has been a large body of opinion, on this side of the House especially, which has never been part of this consensus and, what is more, never will be? In view of the fact that the Common Market is showing the first real signs of cracking up, why bother with it at all?

Mr. Alan Williams: My hon. Friend should bear in mind that in the last two years we have had only about a dozen questions, including supplementary questions, from Government supporters on this subject—

Mr. Skinner: So what?

Mr. Alan Williams: My hon. Friend says "So what?" If it comes to consultation, I have on several occasions raised this matter with the appropriate Back Bench committee. It has never been challenged in that committee. When various metrication Orders have come forward for discussion, there has been little participation by my hon. Friends. Those hon. Members on both sides of the House who think that they do anyone a service by trying to bury their heads in the sand should remember that nearly 15 million children have gone through or are going through the school system since the decision to go metric was made. We have a responsibility to them as well.

Mr. McCrindle: asked the Secretary of State for Prices and Consumer Protection how many representations on metrication she has received since 23rd March from bodies representing industry and consumers, respectively.

Mr. Alan Williams: Since 23rd March I have received representations from 21 organisations, 14 representing industry and seven representing consumers. The overwhelming majority of representations received by the Department, both before and after 23rd March, support the view that the orderly completion of the metrication programme is essential and that there should be no avoidable delay in the progress of the Weights and Measures, &c. Bill.

Mr. McCrindle: As industry seems anxious to proceed to metrication in view of the potential loss of export orders if that course is not followed, but as the consumer is understandably anxious about such matters as possible profiteering and confusion, how practical is it to extend the powers of the Metrication Board on the one hand or the Office of Fair Trading on the other so that some consideration may be given to the interests of the consumer, while not delaying the metrication of industry?

Mr. Alan Williams: I appreciate the constructive spirit in which the hon. Member has put forward his proposition. It received the inevitable negative response from his own Front Bench, a situation with which I am becoming fully acquainted on this subject.
I am not sure that the Metrication Board would have the necessary power.

We have the use of unit pricing and prescribed quantities in this respect. I am considering the possibility of using the Price Commission on a special reference to deal with pricing over the period of metrication, and I have asked the Retail Consortium to consider whether it can act as a first-stage vetting operation on the goods which flow from manufacturers at the time of metrication—although I recognise that this may not be possible for it.

Mr. Nicholas Winterton: asked the Secretary of State for Prices and Consumer Protection whether she has made any estimate of the cost to retailers of metrication; and whether she will publish it.

Mr. Alan Williams: I accept the conclusion of the Conservative Government's 1972 White Paper that it is impossible for the United Kingdom, as it has been for all countries which have changed to the metric system, to make an estimate of the total costs of the metric changeover. I also agree with that White Paper's statement that
the costs of a quick and radical change would be high, as would the costs of a protracted and unplanned change, but direct costs can be reduced, sometimes almost to zero, by a phased introduction of metric equipment".
One of the aims of the Weights and Measures, &c. Bill is to ensure that costs are minimised. The Opposition attitude, in so far as I am able to understand it, would be to maximise costs and confusion.

Mr. Winterton: Will the hon. Gentleman take it that both retailers and consumers are deeply concerned about metrication, as they were about decimalisation, and will he therefore make a major contribution to orderly progress in this matter by considering publishing details of firm cut-off dates for the various commodities, and also proposals for consumer safeguards?

Mr. Alan Williams: I dealt with the consumer safeguards side of it in reply to a previous Question. As regards prices cut-off dates, I find the hon. Gentleman's attitude somewhat strange. On the one hand, the Opposition berate us for wanting to take powers and, on the other, they want a tighter timetable, apparently, than we envisage. I make


this genuinely practical point to the hon. Gentleman, and I hope that his hon. Friend the Member for Gloucester (Mrs. Oppenheim) will absorb it. The fact is that certain sections of industry, trade associations and so on have made clear to us that until Section 10(10) of the 1963 Act is amended, they are not, because of their members' reluctance, in a position actually to negotiate a timetable. I cannot therefore give a predetermined timetable until I have had those negotiations, and the Section 10(10) amendment is a prerequisite of starting the negotiations.

Mr. Molloy: Does my hon. Friend recall that during the decimalisation period there was grave dissatisfaction and apprehension throughout the country, when ordinary people, to put it frankly, felt that they were being fleeced and cheated, and this has been almost proved since? Will my hon. Friend therefore invoke the aid of the consumer councils and other machinery he has to hand to ensure that there is no repetition of such disgraceful behaviour on the part of some commercial undertakings?

Mr. Alan Williams: Whether there was or was not exploitation at the time of decimalisation, it is clear that in the public mind there was, and there is therefore legitimate public concern. But let us understand why, if there was exploitation, it was possible for it to take place unchecked. This was because the whole trading environment changed at that time, and the purpose behind changing Section 10(10) is to enable changes to take place sector by sector so that proper vetting can take place. The more things are compacted into a short time, the more we push against the deadline which the Opposition entered into, the more likely it becomes that we shall have an uncontrolled change-over.

Mr. Lawson: What possible justification can there be for the increase of 40 per cent. in the running costs of the Metrication Board between 1974 and 1975, that is, to almost £1 million? What will it cost this year?

Mr. Alan Williams: I invite the hon. Gentleman to read the Metrication Board's report, which will, I believe, be published this week, in which most of these things will probably be made clear. But here again, on the one hand, we are

asked for greater publicity to produce public awareness of the problems of metrication, as was requested in a previous Question, but then complaint is made when the organisation which is to do it actually spends some money.

Petrol (Retail Sales)

Mr. Lane: asked the Secretary of State for Prices and Consumer Protection whether she will make a further statement on recent developments in the retail petrol market.

Mr. Alan Williams: I have nothing to add to the reply given on 18th February to my hon. Friend the Member for Woolwich, East (Mr. Cartwright).

Mr. Lane: As the Minister watches developments, will he bear in mind the rate at which small retailers are being eliminated because of the present very low margins, and also the risk that, if this process goes too far, motorists will face a further worsening in service on the forecourts?

Mr. Alan Williams: I am grateful to the hon. Gentleman. It is a worrying point and I have had the representatives of the retailers—the MAA and the PRA—and of the major petrol companies in to see me to discuss these problems. All of them have accepted that, because of the changes taking place in the market for petroleum products, there is bound to be some reduction in the number of outlets. My concern and, I suspect, that of the hon. Gentleman is to ensure that that reduction takes place in as fair a way as possible. I believe that Government participation at this stage can only distort the change of pattern that is taking place. I have made it clear that I intend to keep this under scrutiny.

Mr. Ioan Evans: Can my hon. Friend do something to protect the motorist who still finds himself in a very confused situation when he passes petrol stations offering 20-fold or 12-fold stamps, coupons, or 8p or 9p off the price of a gallon of petrol, because the signs displaying these offers do not say off what? Cannot he appeal to the appropriate body to state the actual price that the motorist will be charged for the different grades of petroleum?

Mr. Alan Williams: The plea made by my hon. Friend is echoed by most


motorists in this country. However, I might point out that the most forceful way for motorists to state their case is to go to petrol stations showing the prices being charged. At my request, the Director General of Fair Trading is now carrying out negotiations with retailers and petroleum companies to achieve proper price displays. I think that agreement can be reached in the case of price competition, but I am determined that it should extend to stamp trading as well, because it is important for people to know what 20-fold stamps represent, as well as what is meant by 7p off the price.

Mr. McCrindle: With 20-fold or 30-fold stamps available on the one hand and substantial cash discounts available on the other at the same time as companies appear to be wishing to put up prices again, cannot the Minister use his good offices at least to knock a few marketing heads together in order thereby to eliminate some of the confusion among motorists?

Mr. Alan Williams: This is why I have had meetings with the petrol companies and with retailers. There is an understanding amongst the retailers and amongst the companies themselves that they are not only creating confusion for the motorist but damaging their own good will with the public. That is why we are likely to get some reasonable agreement between them and the Director General of Fair Trading.

Nationalised Industries

Mr. MacGregor: asked the Secretary of State for Prices and Consumer Protection what representations her Department has received from consumer bodies about the effect upon consumers of recent proposed increases in charges in the public sector; and what action she has taken in the light of these representations.

Mr. Maclennan: My right hon. Friend receives representations about the effect of public sector prices from the nationalised industry consumer councils as well as other interested consumer bodies; the Government take these fully into account when considering all proposed price increases.

Mr. MacGregor: Has the Minister seen the constructive report from the Post

Office Users' National Council on the proposed increases in parcel post charges which argues that on commercial grounds these charges may be fraught with danger and urges deferment for six months pending discussions with large users? In view of the effect that these increases will have on many industries, which will come straight through in prices to very many consumers, ought not the Secretary of State to be pitching her weight behind the representations to defer the increases for six months?

Mr. Maclennan: I have seen the recommendations of the POUNC on this. The hon. Gentleman will be aware of the reply of the Minister of State, Department of Industry on this subject, he being the responsible Minister. I am afraid that the problem will not be resolved by mere deferral, though the arguments put forward by the POUNC are weighty and are being given careful consideration.

Mr. Lipton: Is my hon. Friend aware that very considerable difficulties are placed in the way of gas consumers because of the decision of gas offices to remove their telephone numbers from local telephone directories, so that it is impossible now for anyone to get in touch with his local gas office?

Mr. Maclennan: I am grateful to my hon. Friend for raising that point, and I shall certainly look at it.

Mr. Norman Lamont: Did the hon. Gentleman notice the specific criticism of of the POUNC of the refusal of the Post Office to make information available to it? What does he intend to do about that?

Mr. Maclennan: That is one matter being considered. But the hon. Gentleman will realise that the Corporation is not answerable to any Minister for points of internal management.

Hallmarking

Mr. Hooley: asked the Secretary of State for Prices and Consumer Protection if she will make a statement on the policy of Her Majesty's Government towards the EEC draft directive on precious metals which could alter the well-established system of hallmarking now operating in the United Kingdom.

Mr. Alan Williams: While the draft directive is intended to reduce barriers to trade in articles of precious metals within the Community, I am considering representations that its implementation in its present form might adversely affect our trade, weaken the protection afforded to consumers by our present hallmarking system, and be technically unsatisfactory. In further Community discussions we shall be making it clear that, to gain United Kingdom support, the directive must take account of the interests of all the member States of the Community and the desirability of including effective technical provisions on quality control and marking.

Mr. Hooley: Is my hon. Friend aware that this proposal has been condemned by the Assay Master of the Sheffield Assay Office and by the Cutlery and Silverware Manufacturers Association? Is he aware that Germany, Italy and Denmark have no assay system and have no intention of setting one up? Will he resist this neurotic obsession of Brussels with harmonisation?

Mr. Alan Williams: I have no objection to harmonisation where it furthers the interests of the people concerned, but I shall resist as far as possible harmonisation which detracts from the interests of the consumer. As for the type of case to which my hon. Friend is referring, we have only recently ratified the international convention in this respect. There will be great benefit for the industry in this country if we can secure greater agreement at an international level. Clearly, however, there must be unequivocal standards which are accepted by all the countries concerned if the consumer's interest is to be protected.

Inflation

Mr. Tim Renton: asked the Secretary of State for Prices and Consumer Protection what was the six-month annualised rate of inflation in the six months ending December 1975, January 1976 and February 1976.

Mrs. Shirley Williams: Despite the fact that these three six-monthly periods comprised 25, 26 and 27 weeks respectively, the all-items index, less seasonal foods, which is the best trend indicator, has on an annualised basis steadily

declined from 14·1 per cent. to 13·6 per cent. to 13·2 per cent.

Mr. Renton: Is the Secretary of State aware that, including seasonal foods and drinks, the rate has gone in precisely the opposite direction—from 14 per cent. to between 14·1 per cent. and 14·9 per cent.? Is she not very alarmed at the steep rise in the prices of imported commodities? They averaged 20 per cent. in one month alone in the case, for example, of coffee, cocoa, copper and lead. In her Jekyll and Hyde rôle in the Cabinet, what action is the Secretary of State proposing to defend sterling in the coming months to ensure that imported inflation does not ruin the Chancellor's plans?

Mr. Speaker: Order. Everyone will have observed that both questions and answers are developing into speeches today. This is not the time for debating.

Mrs. Shirley Williams: On the first part of the question, I am using a period of six months, which is invariably used and which has been used by this Government from the beginning on questions on this subject. Seasonal factors inevitably show a rise in the winter and a fall in the summer and create difficulties in the statistical pattern. I am using the same statistics as I have used throughout on questions on this subject. That is the proper basis for comparison.
On the second part of the question, there is some indication of a hardening of certain commodities, particularly food and metals, quite apart from the effect of any decline in the value of the pound. The effect of the decline in the value of the pound on the Retail Price Index since 1972 when the float began is about 5 per cent. up to the present. This does not take account of certain changes which take longer to show their effect, but the pound inevitably reflects varying inflation rates and it is evident what the Government are trying to do about that.

Mr. George Rodgers: Does my right hon. Friend agree that the impact of inflation is not consistent throughout the population? Because low income groups and large families have to pay a proportionately larger part of their income for energy, food and rent, they are hit much harder by inflation.

Mrs. Shirley Williams: My hon. Friend is correct. That is why the Government have continued with both food subsidies and rent subsidies and have recently increased both during the period of the counter-inflation policy.

Mr. Henderson: Does the Secretary of State agree that the impact falls more heavily on different parts of the country, and that in north and north-east Scotland people are particularly hard hit because of the increase in transport charges? They are not protected by the London weighting allowances as are people here

Mrs. Shirley Williams: There is some evidence that the pattern of regional pricing is rather more varied than the hon. Gentleman's question implies. It is not the case generally that Scottish prices are higher than prices throughout the rest of the United Kingdom.

Mr. Gow: asked the Secretary of State for Prices and Consumer Protection what is the most recent year on year rate of inflation.

Mr. Gwilym Roberts: asked the Secretary of State for Prices and Consumer Protection what are the latest figures available for the year to year and month to month rates of inflation; and if she will make a statement.

Mrs. Shirley Williams: The February 1976 month on month increase in the Retail Price Index was 1·3 per cent. and this brought down the overall 12 month figure to 22·9 per cent.

Mr. Gow: To what extent does the right hon. Lady think that the unprecedented public sector borrowing requirement envisaged this year constitutes a real threat to the Government's anti-inflation policies?

Mrs. Shirley Williams: No one would deny that the PSBR is very high and needs to be brought down. However, I do not think that that matter arises directly from the Question.

Mr. Roberts: Will my right hon. Friend take this opportunity of agreeing with me—[HON. MEMBERS: "Oh".]—for once—that the forecasts made by the gloom-mongers of the Opposition or the long-haired Cambridge economic forecasters, that inflation will take off again

in the long term, are not based on any reputable statistical evidence whatsoever?

Mrs. Shirley Williams: I shall endeavour to take every opportunity to agree with my hon. Friend. On this occasion I should like to say that as this is a country that invariably presents the most gloomy view of its own achievements, it is worth mentioning that the cutting of the rate of inflation by more than half in one year is a pretty remarkable achievement in a democracy, even though we still have a long way to go.

Mr. Giles Shaw: Will the right hon. Lady take this opportunity of reminding the House that it was neither long-haired Cambridge economists nor Opposition Members but her right hon. Friend the Chancellor of the Exchequer who predicted a rate of inflation of 8·4 per cent.?

Mrs. Shirley Williams: The Chancellor was predicting a figure which was borne out on a three-monthly basis. The Opposition are not at all averse to using a three-monthly basis if they choose.

Mr. Heffer: What effect has the CAP had on our inflation? By how much have food prices risen as a result of the CAP?

Mrs. Shirley Williams: The effect of the CAP settlement on the food index—not on the RPI—was about 1¼ per cent. That must be added to a transitional policy stage increase of about 1 per cent. The effect on the RPI is therefore about 0·5 per cent.

Electricity Users' Consultative Council

Mr. Durant: asked the Secretary of State for Prices and Consumer Protection whether she has any plans to meet the Electricity Users' Consultative Council.

Mr. Alan Williams: I will be meeting Mr. Tom Young, the new Convening Chairman of the Electricity Consultative Councils, tomorrow to discuss a number of matters of interest to electricity consumers.

Mr. Durant: When the Minister meets the Council will he discuss the various problems facing old-age pensioners who do not understand the different tariff rates of the electricity boards? Will he


discuss also the inequities of the rates of standing charges?

Mr. Alan Williams: The hon. Member is right in saying that the public could benefit from clear information about the importance of being on the right tariff. There have been discussions on this subject with the industry and I am willing to discuss it further with Mr. Young tomorrow.

Mr. Carter-Jones: Will my hon. Friend consider with the Council the idea advanced by housing chairmen that heating costs should form part of the rent and that rent rebates could therefore be given? That would therefore avoid the risk of hypothermia among the elderly.

Mr. Alan Williams: I have not seen that proposition before and I shall look into it.

Mr. Rost: Since fuel represents 60 per cent. of the CEGB's costs, will the Minister talk to the Department of Energy about what can be done to improve the thermal efficiency of the power-burn, which would make a most important contribution to keeping down electricity prices? This is being done on the Continent.

Mr. Alan Williams: The thermal efficiency of power-burn is outside the remit of my Department.

Mr. Cryer: Does my hon. Friend agree that, since food subsidies are an important element in the budget of old-age pensioners and others on low incomes, it would be better if subsidies to the nationalised industries, including gas and electricity, were to be maintained or phased out over a much longer period? Would not this reduce the difficulties which increased gas and electricity charges are causing to these people?

Mr. Alan Williams: If the basic proposition put forward by my hon. Friend were sound, I would accept it. Our researches show, however, that, whereas the benefits of food subsidies operate four to one in favour of the low-income family, subsidies on fuel actually work two to one in favour of the high-income families. If we have £100 million to spend, we have to decide how it will create the maximum social benefit—putting

it on foodstuffs or putting it on electricity.

£ Sterling (Value)

Mr. Stonehouse: asked the Secretary of State for Prices and Consumer Protection what is her assessment of the effect of the continued decline of the £ sterling on domestic retail prices of food, clothing and other essential items which have a high import content.

Mrs. Shirley Williams: Sterling depreciation affects domestic prices differently depending on import content. It has been estimated, however, that a 5 per cent. depreciation leads to a 1 per cent. to 1½ per cent. increase in the Retail Price Index over a period of about one year.

Mr. Stonehouse: Is not the Secretary of State very concerned about the continued depreciation of sterling? As she is probably aware, there has been a decrease of over 10 per cent. in the value of sterling against most other currencies in just the last month. How soon will it be before that reflects itself in higher prices in this country?

Mrs. Shirley Williams: I have already given an indication of the answer to the second part of the right hon. Gentleman's question. As regards the first part of the question, any responsible person must be concerned about sterling depreciation. The right hon. Gentleman will appreciate that the only way to deal with this is by a direct frontal attack on inflation of the type that the Government are mounting.

Mr. Mike Thomas: As on this Question and others my right hon. Friend has strayed well into the area of Treasury matters, will she say when she will detail her responsibilities as Paymaster-General and whether she will answer Questions relating to them on Prices and Consumer Protection days or join the Treasury team for Treasury Question Time?

Mrs. Shirley Williams: My hon. Friend will appreciate that I have endeavoured to be helpful, and a number of hon. Members on both sides of the House have carefully put into their original Questions references to domestic prices. It is a little difficult to transfer all these Questions without seeming to be singularly unhelpful to the House. However, I take my hon. Friend's point. I am not an


additional wheel to the Treasury team. It does not need one.

Mr. Crawford: Does the Secretary of State agree with her right hon. Friend the former Paymaster-General, now Secretary of State for Trade, who in Glasgow a month or so ago said that a strong currency in the form of a Scottish pound was something to be avoided?

Mrs. Shirley Williams: I think that my answering a question on the Scottish pound is also something to be avoided.

Fair Trading Act 1973

Mr. Luce: asked the Secretary of State for Prices and Consumer Protection whether she remains satisfied with the operation of Part II of the Fair Trading Act 1973; and if she will make a statement.

Mr. Alan Williams: I am not wholly satisfied with the way Part II has operated so far. But when all concerned have had more experience of the novel procedure introduced by the Act I expect it to operate more quickly.

Mr. Luce: As the main purpose of Part II of the Fair Trading Act is to provide speedy and effective procedures for dealing with consumer malpractices and thereby to strengthen fair competition, and as it has taken an extremely long time to deal with the three main references that have been made by the Director General of Fair Trading, what will the Minister do to improve procedures and machinery for dealing with these matters?

Mr. Alan Williams: I am grateful to the hon. Gentleman. These are valid points for us to be considering. I have naturally discussed this subject with the Director General and the CPAC itself. Part of the difficulty may be not inherent in the machinery but perhaps in the way in which it has been used. There are certain very serious problems. I trust that we shall have a discussion on these soon after the Recess. For example, on one problem a very serious question of vires arises. I think that the whole House would take the view that where one is creating criminal offences and where there is a question of vires, it is very important that Ministers and the Government should get it right.

National Consumer Council

Mr. Norman Lamont: asked the Secretary of State for Prices and Consumer Protection when she next plans to meet the Chairman of the National Consumer Council.

Mr. Alan Williams: My most recent meeting with the Chairman of the National Consumer Council was last Tuesday, 6th April. I have since asked to meet the Chairman and the full Council in the near future. Ministers and officials of the Department are continually in touch with the Chairman of the Council.

Mr. Lamont: In view of the conclusion by the Price Commission that increases in nationalised industries' prices were greater than would be justified merely by the withdrawal of subsidies and in view of the concern that has been expressed on both sides of the House about nationalised industry price rises, will the Minister discuss with the Chairman of the National Consumer Council ways in which the consultative committees might be strengthened, particularly as they have been revealed as being so ineffective?

Mr. Alan Williams: I am a little surprised that the hon. Gentleman has overlooked the review, to which I have referred on several occasions, which my right hon. Friend and I set in motion, asking the NCC to do exactly that. It is due to report, I hope, within the next two months or so on the operation of the nationalised industry consultative councils. The hon. Gentleman will be aware that my right hon. Friend has given the reference to the NCC to investigate the impact of energy tariffs upon the low-income family.

Mr. Ioan Evans: When my hon. Friend meets the Chairman of the NCC, will he congratulate him on the work of the Council since it was set up by the present Government? Does it not prove that the action taken by the Opposition in abolishing the old Consumer Council was very damaging to consumer interests?

Mr. Alan Williams: The surprising thing is that the hon. Member for Gloucester (Mrs. Oppenheim) has already virtually committed the Opposition, as far


as I read her remarks in an interview, to abolishing the NCC, or at least, apparently, she regards it as superfluous. The important thing that must be established, however, is that the NCC—whether or not I agree with it on points of difference—has taken exactly what we told it to take—an independent line on behalf of consumers. It is up to myself and my right hon. Friend to discuss whether there are points of difference, but certainly the National Consumer Council is beginning to stand up not only for itself but for the consumer.

Price Code

Mr. Neubert: asked the Secretary of State for Prices and Consumer Protection whether she will make a statement on the progress made in her negotiations about the future of the Price Code.

Mrs. Shirley Williams: Many organisations have made representations, and I am considering the evidence and views put to me in the framework of the Government's economic objectives. I am very willing to receive views from other interested organisations.

Mr. Neubert: As it is now clear even to the Government that institutions and individuals will invest in industry only if they can earn a sufficient return on their money, will the right hon. Lady seek to advocate the abolition of the Price Code and of dividend restraint in the interests of higher investment and more jobs?

Mrs. Shirley Williams: Perhaps conveniently, the hon. Member is forgetting, first, the genesis of the Price Code and, second, the fact that we were the Government who introduced the investment relief. But I make no bones of the fact that higher investment is of great importance, and this is a central factor in our review.

Oral Answers to Questions — NORTH SEA OIL (PARTICIPATION AGREEMENTS)

Mr. Canavan: asked the Chancellor of the Duchy of Lancaster whether he will make a further statement about his progress in negotiating participation agreements with the oil companies.

Mr. Skinner: asked the Chancellor of the Duchy of Lancaster whether he has

anything further to add to his recent statement regarding progress in negotiating with the North Sea oil companies.

The Chancellor of the Duchy of Lancaster (Mr Harold Lever): Negotiations with the oil companies are continuing to make progress, but I have nothing to add at present to the reply I gave my hon. Friend the Member for Bolsover (Mr. Skinner) on 5th April.

Mr. Canavan: Will my right hon. Friend take a tougher line with such companies as BP and Shell by pointing out the unpatriotic nature of their resistance to entering into genuine participation agreements with the Government, especially in view of reports that they are shelling out literally millions of pounds to Italian political parties?

Mr. Lever: BP has agreed in principle to participation, and negotiations are proceeding, which, I have no doubt, will end satisfactorily. As regards any contribution to political parties, I take it that my hon. Friend is referring to newspaper reports and that he would wish to join with me in the conventional presumption of innocence until the contrary is proved.

Mr. Rost: How can the right hon. Gentleman continue to pretend that participation is being negotiated without arm-twisting when it is becoming evident that BNOC's junior partners will be offered the juiciest first bite at the next round of licensing?

Mr. Lever: That supplementary question is suggestive more of the carrot titan of the stick.

Mr. Skinner: In view of what my right hon. Friend has just said about the business of BP and Shell in relation to the Italian political scene, can he give a categorical assurance that all the oil companies with which his Department is dealing have at no time in the recent negotiations given any back-handers of any description to either politicians or civil servants? Further, does he not agree that, whatever the purport of recent allegations may be, it is only too clear that the best thing to do in the business in which he is currently involved is to insist that Britain controls all her own oil and the operation of it?

Mr. Lever: My hon. Friend can rest assured that to the best of our knowledge there has been no suggestion whatever of corruption here in Britain in relation to the oil companies' activities. Nor, for that matter, has there been any occasion which would have justified such corruption.

Mr. Henderson: Is it not possible that these two companies are dragging their feet because they wish to conclude negotiations with an independent Scottish Government after the next election?

Mr. Lever: I am not sure that that is the motivation of all the companies which have so far held back a little cautiously on this issue.

Mr. English: Has my right hon. Friend read the documented allegations in the Press that political contributions by two of the companies with which he is negotiating were given in return for specific financial "quids" pro quo in Italy, and has he read the oil company executive's statement that they were no different from political contributions to British political parties? Will my right hon. Friend therefore refute, if he can—or invite the Opposition to refute—the grave allegation which the oil companies have made against members of Opposition parties?

Mr. Lever: I am not the custodian of the Opposition's conduct or activities. I can only say that my hon. Friend the Member for Bolsover (Mr. Skinner) was strictly correct in protocol in directing his question on this issue to the matter which is relevant, namely, whether the negotiators had received any such encouragement as is alleged to have been given to people in Italy. I can only assure my hon. Friends that there is not the smallest ground for believing that there has been any corruption of any kind whatever in this country.

Mr. Tim Renton: Will the Chancellor of the Duchy of Lancaster clarify his reply to his hon. Friend the Member for Bolsover (Mr. Skinner)? He used words to the effect that he was not aware of any circumstances that would justify corruption. Will he assure the House that he

at all times assumes that no circumstances justify corruption?

BILLS PRESENTED

RENT (AGRICULTURE)

Mr. Secretary Shore, supported by Mr. Secretary John Morris, Mr. Frederick Peart, Mr. Denzil Davies, Mr. Ernest Armstrong, Mr. Attorney General, and Mr. Gavin Strang, presented a Bill to afford security of tenure for agricultural workers housed by their employers, and their successors; to make further provision as to the rents and other conditions of tenure of such persons, including amendments of the Rent Act 1968; to impose duties on housing authorities as respects agricultural workers and their successors; and for purposes connected with those matters: and the same was read the First time; and ordered to be read a Second time tomorrow and to be printed. [Bill 122.]

HEALTH SERVICES

Mr. Secretary Ennals, supported by Mr. Michael Foot, Mr. Chancellor of the Exchequer, Mr. Secretary Millan, Mr. Secretary John Morris, Mr. Joel Barnett, and Dr. David Owen, presented a Bill to make further provision with respect to the use or acquisition by private patients and others of facilities and supplies available under the National Health Service Acts 1946 to 1973 or the National Health Service (Scotland) Acts 1947 to 1973; to control hospital building outside the National Health Service and provide for the amendment of enactments under which registration is a prerequisite for carrying on a nursing home or private hospital; and for those purposes to establish a Health Services Board: and the same was read the First time; and ordered to be read a Second time tomorrow and to be printed. [Bill 120.]

Orders of the Day — WAYS AND MEANS

Order read for resuming adjourned debate on Question [6th April].

AMENDMENT OF THE LAW

That it is expedient to amend the law with respect to the National Debt and the public revenue and to make further provision in connection with finance; but, without prejudice to any authorisation by virtue of any resolution relating to value added tax, this Resolution does not extend to the making of amendments with respect to that tax so as to provide—


(a) for zero-rating or exempting any supply;
(b) for refunding any amount of tax;
(c) for reducing the rate at which tax is for the time being chargeable on any supply or importation otherwise than by reducing that rate in relation to all supplies and importations on which tax is for the time being chargeable at that rate; or
(d) for any relief other than relief applicable to goods of whatever description or services of whatever description.—[Mr. Healey.]


[Commission Documents Nos. R/622/76 and R/606/76 on Policy Guidelines for 1976.]

Question again proposed.

BUDGET RESOLUTIONS AND ECONOMIC SITUATION

3.31 p.m.

The Lord President of the Council and Leader of the House of Commons (Mr. Michael Foot): May I first apologise to those right hon. and hon. Members who spoke earlier in the debate and whose speeches I did not hear? I have done my best to repair that deficiency in the last day or two, but there was an intervention in the normal processes and, therefore, I have not been able to be present at the debate as often as I wished.
Whatever other crimes I have committed, I hope that the crime of not listening to what other people say is not one of them. Some people are inclined to deride the House of Commons as a talking shop, but people outside the House do not always recognise that in order to be a talking shop it is also necessary to be a listening shop. Try as we may, it is impossible to survive long in the House without listening to what other people have to say.
That is a healthy process. I do not say that because I am in favour of searching for any muzzy, sodden consensus as a solution to our national problems. I detest the word "consensus". I am not sure that I know what it means and I am not sure that other people know what it means. I believe that the process of compelling hon. Members who are in the Chamber, or outside it in Committee Rooms, to listen to what other people have to say means that this is a place where we can hear how intelligent, formidable and considerable are the arguments of one's critics or opponents in other parties or in one's own party. That is what the House of Commons is for, and it discharges that function better than many people in the country sometimes acknowledge.
In continuing the debate on the Budget, I want to underline afresh what the Budget seeks to underline afresh and what have been the declared objectives of the Government. First, we are determined to beat inflation. We are determined to bring down the inflation rate, as we promised last July, into single figures and then to bring it down again as speedily as we possibly can. I hope that no one in any part of the House, in the country or anywhere else has a mistaken notion about our determination to proceed along those lines.
To double that assurance, I shall translate the economic situation into political terms, which is always a wise course. Anyone looking around the world can see that, electorally speaking, more Governments, including Left-wing or Leftish Governments, have been thrown out of office and from power through a failure to deal with inflation than through any other single cause. We have no intention here of being swept out of power and I hope for that reason, amongst others, that people will understand our determination to deal with the inflation rate.
Second—but not subordinate to the first objective because it goes hand in hand—we must do everything we can to reduce the still appalling level of unemployment. That is a concern which is uppermost in the minds of my hon. Friends, and I shall say something further about that later. I trust that there is no mistake about our determination to

do everything we can to bring down the unemployment level.
The third objective of the Government—which is not always fully accepted and understood, but is one which we have pursued throughout our time in office particularly in the Department of Employment—is to protect the low paid. Rising prices impose their heaviest burden upon the poorest sections of the community, and we have therefore always sought to secure policies that will assist the low paid.
Those are the three objectives that we have had and should continue to have—to beat inflation, to bring down the unemployment level and to protect the low paid. The virtue of the Budget proposals is that they can assist us in achieving those three aims at the same time. No one can dispute that the proposal for securing the low pay limit will have a dramatic effect on the inflation rate. The proposal will have beneficial effects on the unemployment situation. It will enable us to have many other jobs that might be lost and to create new jobs in places where they can be most beneficial for the country as a whole.
Perhaps the House and the country do not fully understand how that objective or policy can also assist in helping the low paid. I do not say that it can protect them fully against the hazards which are involved in the present situation, because that is not entirely possible. I claim, however, that ever since March 1974 the Government and the Department of Employment have done everything in their power to try to protect the low paid. We are determined to continue with that policy in the future.
I can best express our policy in this way. Over the past two years—it began with the £30-a-week target in the first year and the £6-a-week limit in the second—a man on £30 a week with two children has increased his money income, whether gross, take-home or inclusive of social security benefits, one and a half times as fast as a similar man on average earnings and at least three times as fast as a man on £8,500 a year last year. That £30-a-week man's standard of living has been better protected than that that of others with higher pay. Under my right hon. Friend the Chancellor of the Exchequer's proposals he will continue to do better than the average man. That


is the third advantage of proceeding in this manner. These three factors together should be taken into account.

Mr. Frank Allaun: Is my right hon. Friend's last remark strictly accurate? While it is true that the low-paid worker may have had an increase proportionately higher than that of a man on £8,500 a year, the man at the bottom had a smaller increase in cash than the higher-paid man.

Mr. Foot: I do not think that he had a smaller increase in cash terms. The figures that I have given cover the whole of the two years. I agree that the fact that we have been able to protect the low paid comparatively does not mean that the low-paid have been protected absolutely against the consequences of inflation. I fully concede that, but one of the purposes of our policy is to secure better protection against inflation for all concerned, but especially the low-paid.
The facts are indisputable, and they are very important for Socialists in their approach to these matters. I am claiming that in the conduct of incomes policy over the past two years the Department of Employment has deliberately sought, after full consultation with the trade unions concerned, to provide as best we could special protection for the low paid, despite the difficult circumstances. I believe that that should continue.
One of the reasons why I emphasise this so strongly is that whatever is to happen in the new pay round—and I understand that this is a major feature of our debate and the debate that will continue in the country for quite a long time—there is a conflict of interest between those who say "we must relax the differentials" and those who say "we must sustain the flat-rate principle to protect the low paid." It is no use trying to disguise that conflict of interest.
A percentage figure alone, applied across the board and with nothing else, would certainly be extremely harsh upon the low paid. A percentage figure of 3 per cent. and nothing else would not sustain the assistance for the low paid that we have sought to provide over the last two years. That is why there are advantages, if we are not to have a full flat rate to protect the low paid, in seeking a combination of flat rate for some

on the lower level and a percentage for those higher up, with a choice if one can provide it. But if one cannot provide it in that way one can provide some buttress for the low-paid through the relief of taxation proposed by my right hon. Friend.
In all our discussions about what is to be the future of the pay policy, we must seek not only to cut inflation and unemployment, which are the paramount objectives, but to be as fair as we can to the low paid. That is one of the purposes behind the policy as well.

Mr. Mike Thomas: Is there not a paradox which makes my right hon. Friend's explanation rather more difficult? The Government have allowed those receiving benefits to have substantial increases in real income—15 per cent. to 17 per cent. for the pensioner, for example—while the increase for someone on the average wage is perhaps nearer 1 per cent., 2 per cent. or 3 per cent. in real terms. The incomes of the low-paid have appeared to come closer and closer to the incomes of those receiving benefit, particularly those on benefit with large families. Therefore, the Government are suffering from that bad contrast in their own good policy.

Mr. Foot: I am sure that there is some truth in what my hon. Friend says, out I am also sure that no one would therefore urge the Government to be more slothful in trying to increase the benefits. I am sure my hon. Friend is not arguing that, though it is true that the contrast has been emphasised by the measures that the Government have taken to improve security benefits.
It is not fully appreciated in the country that, despite difficult circumstances, the Department of Employment has sought for two years to make special provision for low-paid workers. We want to see further special provision made in the coming year.

Mr. Ralph Howell: Is not the right hon. Gentleman aware that as a result of the Chancellor's proposals the tax thresholds will fall in relation to average earnings: that if the full concession is allowed they will still fall, and that the poverty trap has widened


considerably in all respects as a result of the proposals?

Mr. Foot: I think that the hon. Gentleman has got it the wrong way round when he speaks about the thresholds. As for the poverty trap, I think he will find when he goes through the details that our proposals will assist, partly because of the other increased benefits being provided.
I am seeking to show that we are following the policy of trying to assist the low-paid as well as dealing with the other problems. That is not an easy thing to do, but we shall continue to try to do it throughout the operation of the policy in the future, as we have in the past.

Mr. George Rodgers: rose—

Mr. Foot: I give way to my hon. Friend, but I hope that hon. Members will then allow me to proceed with other parts of my speech.

Mr. George Rodgers: I am grateful to my right hon. Friend for giving way. I find it difficult to accept that, if the trade unions implement the formula which my right hon. Friend the Chancellor has put to them, those on enormous incomes—£10,000 to £20,000 and more a year—will not benefit considerably more than those on low incomes.

Mr. Foot: There are some aspects of the increase in higher incomes which I agree must be discussed further. I do not dispute what my hon. Friend said about higher incomes. We still have to deal with that matter.
If my hon. Friends compare those with average earnings and wages with those who are low paid, they will see that the low-paid would do better under our proposals than would those on average earnings or just above.

Mr. Dennis Skinner: Not the others.

Mr. Foot: That is a further aspect of the matter. The Government have not been backward in the last two years in imposing a limit, as they did on the last occasion, and I am sure that limits will be imposed as a result of any discussions about the future.
There is another aspect which is very important for the country and the House

to take into account if we are to secure a new pay settlement, which is what I want and the trade unions want and what the country requires. It is very important for us to learn from what has happened since July. It is remarkable in one sense. About 7 million workers have been covered by settlements within the £6 pay limit, more than half the major settlements that would be covered by the pay policy. There have been no major breaches of the policy. There may have been some minor ones, but there have been no major or minor ones condoned by the Department. The Department has been responsible to the House for the administration of the policy, and if we had been guilty of departures from it I am sure that hon. Members in different parts of the House would have raised the matter. There have been remarkably few cases brought to the attention of the House. The reason is that the policy has been carried out in the letter and the spirit to a remarkable degree.
Because that has happened, many commentators and some hon. Members, particularly Opposition Members, have drawn the wrong conclusions. The fact that there have been so few disputes and no breaches does not mean that it has been easy to operate the policy. It has been extremely difficult. It has meant that many awkward, difficult decisions had to be made by the Department. We believed that we had to make them because if we did not the whole policy could crumble. I do not need to instance what has happened in the past few weeks in British Leyland, perhaps the most striking example of the pressures on the pay policy, where the Department made the position quite clear.
There have been difficulties there, but much more difficult has been the position of trade unionists throughout the country, particularly those shop stewards and others in the trade union movement who have been assisting the Government, the country and Parliament in carrying through the policy. They have had to bear the greatest burden. I refer to regional officers, secretaries and shop stewards throughout the country. Conservative Members may smile, but the trade unions have had to tackle a difficult job. Trade union officials who may have opposed the policy, or whose unions may


have opposed it have defended it. They have said "Parliament has passed it, the Labour Government have passed it, we shall seek to sustain it." They have enabled us to achieve the remarkable result of getting about 7 million people to carry through the policy.
It makes me both furious and contemptuous at the same time, if that is possible, when I contrast what has been achieved with the caricature of the relationship between the Government and the trade unions which is portrayed in many newspapers and in the House. The trade unions have not dictated to the Government. It has been a remarkable case of rank-and-file trade unionists, shop stewards and others being prepared to co-operate with the Government, often against their own desires and their own interests. They have chose to co-operate with the Government to carry through the policy.
That is where we must learn for the future. It is not only a question of getting a new policy that can be promulgated from 1st August, important though it is to get it; it is a question of having a pay policy that will stick next April, May and June. That is what we must secure. To achieve that, we must be able to secure the same sort of support, allegiance and co-operation from the trade union movement in the coming year that we have had over the past six or seven months. There is no escape from that except into the abyss of a full statutory policy.
We are as bitterly opposed to that concept now as we were in July when we discussed these matters in the House. A statutory policy is no escape from the problem. It would only arouse the trade union movement against the Government's policy even more furiously. I know that the Liberal Party, or a section of it, chooses to think that a statutory policy is the solution. I am not quite sure where the right hon. Member for Down, South (Mr. Powell) stands on these matters. I think that he is opposed to any form of statutory policy.
If we are not to have a statutory policy, and if we are to have any possibility of dealing with these problems, we must have the support of the trade union movement throughout the country. That is what my right hon. Friend the Chancellor

of the Exchequer underlined on so many occasions during his Budget speech. For example, as reported at column 271 of the Official Report, he said:
The Government's overriding purpose is to reach a fresh agreement with the trade unions on a voluntary policy for the next pay round".—[Official Report, 6th April 1976; Vol. 909, c. 272.]
It is the Government's overriding purpose to reach an agreement with the unions on a voluntary policy. We believe that it is only a voluntary policy that can have any chance of success. It may be more difficult to secure such a policy in these circumstances than it was before, but that is no reason for not seeking it. It is no reason for being downhearted before we start. The right hon. and learned Member for Surrey, East (Sir G. Howe) is always despairing about any policy for dealing with these matters. The right hon. and learned Gentleman, who opened the debate for the Opposition, said that the policy was an abhorrent nonsense that would not work. That was what he had to say not about the policy that was announced in the Budget this year but about the one that was announced last July.
The House may remember our long and heated debates through those July nights. The Opposition, together with a few others, said that the policy would not work. Indeed, some of my hon. Friends said that it would not work for a specific reason. The Opposition Front Bench said that it would not work for a variety of different reasons. The right hon. Member for Down, South said that it would not work for classical economic reasons which he expounds so much better than all his colleagues on the Opposition Front Bench. None the less, I think that very often the right hon. Gentleman applies his logic too persistently and diligently.
The policy has worked so far. I agree that there are still difficulties with which we have to contend. I am not arguing that the policy is home and dry. That is why we must persist in arguing it. However, we command the support of the trade union movement in carrying it out. I believe that on that basis we can proceed to discuss what we should have in the policy next year.
We shall not be dissuaded from discussing with the trade union movement how


we should apply a pay-round policy for the next year. We shall not be dissuaded by any prophecies of doom from the Opposition. We had those prophecies last July, and they were all disproved by what happened.
The Opposition have not been content to say that the policy will not work. They have looked for some reason to try to explain why it will not work.

Mr. Tim Renton: If sterling continues its present downward course and imported inflation becomes a real worry, will the right hon. Gentleman support a statutory wages policy?

Mr. Foot: We had all those "ifs" and "buts" last July. We have had problems with sterling ever since we entered into the inheritance of the Conservative Government. I recall that the hon. Gentleman's question was asked by others during the debates in July. In fact, the question was asked time and time again. His hon. Friends asked "If the policy does not work, when will you introduce the reserve powers?" I made it clear to the House that I was never going to introduce them. I was told that they would have to be introduced the week after next or the month after next. I have hardly heard the words "reserve powers" mentioned since last July. Who was right and who was wrong about the July prophecies?
The hon. Member for Mid-Sussex (Mr. Renton) has asked a highly hypothetical question. I replied to similar questions in July. It would be wrong for the House or the country to think that there is an escape from these difficulties in any statutory incomes policy. That is a policy which makes it a criminal offence for someone to pay above a certain figure-It is hopeless for the country to think that that is a solution. We turned our backs on it last July, and I hope that we shall not be discussing it again.

Mr. Skinner: I agree that there is something in my right hon. Friend's argument about the policy working, and especially about the consent that it has had from trade unions. To some extent it has received the consent of the great mass of trade unionists. But does my right hon. Friend agree that in two fundamental aspects the policy has not worked? It

was introduced along the lines that a bargain would be struck to safeguard employment prospects and the possibility of a cut-back of public expenditure. In those two fundamental aspects the policy has not worked although it has received consent.

Mr. Foot: I am glad to hear the semi-concession made at the beginning of my hon. Friend's remarks, but in regard to the latter part of his comments it is not the case that there was any absolute condition about the other matters. Of course, I shall not conclude without referring to the unemployment situation, because the matter is of absolutely paramount importance. That is a paramount consideration in all these matters. If we are to secure further proposals for another round, it will feature prominently then. I do not deny that. On the topic of public expenditure, however, there has been an understanding and the Government have carried it out.
I return to the point made by the right hon. and learned Member for Surrey, East, whose words seem to be irrelevant in this House and in the country. Indeed, Conservative Front Benchers in general do not appear to participate in many of these matters. It must, however, be said that the right hon. Lady the Leader of the Opposition and the right hon. and learned Member for Surrey, East have discovered fresh ground for attacking the policy. They said that it was a constitutional outrage of some kind or other that we should have discussions of this kind and that the Government should expound this policy as did my right hon. Friend the Chancellor of the Exchequer. I do not know whether that is still the official policy of the Opposition. No doubt we shall hear this afternoon. We know the extraordinary development that occurred, afterwards—namely, that the right hon. Lady the Leader of the Opposition was not even able to carry her right hon. Friend the Member for Worcester (Mr. Walker) with her in her attacks. We know how difficult it must be to create any division between them.
There is also the Liberal Party's view to be considered. Perhaps the Liberal spokesman today, the hon. Member for Colne Valley (Mr. Wainwright), will tell the House on which side of the issue he comes down. The Leader of the Liberal Party supports the policy, but


the hon. Member for Roxburgh, Selkirk and Peebles (Mr. Steel) thinks it a constitutional outrage that any such proposition should be put forward. Nobody who considers the matter can believe that it is a constitutional outrage, because the final authority rests with the House of Commons. That is the fact of the matter. It will all come back to the House of Commons, it will be debated here and settled here, as it should be. For anybody to describe that as a new form of the corporate State is an absurdity of gigantic proportions. But that is how the right hon. and learned Member for Surrey, East and The Times see the matter.
To make exactly sure where it came from, I looked up the word "corporatism" in the latest volume of the New Oxford Dictionary. The first example of the use of the phase "corporate State" in that dictionary comes from The Times of 18th August 1927. The Times of that date said:
The corporatist state offers greater opportunities than the liberal state.
I wonder what kind of mischief The Times was up to in 1927 when it welcomed the corporate State, a few months after the murder of Matteotti and other persons in Italy. I hope I shall not be accused of being an advocate of the corporate State. Indeed, I am the very opposite. A corporate State involves as its central principle that trade unions should be "cabin'd, cribb'd, confin'd" as they were under the Industrial Relations Act 1971.
The crime I am supposed to have committed is to have liberated the trade unions. Whether I am accused by the right hon. and learned Member for Surrey, East, the author of the Industrial Relations Act, or by The Times newspaper of being an advocate of a corporate State, that suggestion is not merely a case of Beelzebub seeking to cast out Beelzebub or even of Satan rebuking sin but is more a matter of Satan rebuking the archangel Michael. Let us hear no more such nonsense.

Mr. David Lane: rose—

Mr. Foot: I have already given way many times. I am about to come to two matters that I consider to be important.
There is no departure from any constitutional principle in what the Government have proposed. The supremacy of the House of Commons is sustained. I believe in the supremacy of this elected House. I believe that every other person and institution in the country must bow to it.

Mr. J. Enoch Powell: Or outside?

Mr. Foot: I shall come to the right hon. Member for Down, South in a moment. I was not ignoring him. There are some others who must bow to that supremacy. I refer to Prime Ministers, Cabinet Ministers, ex-Prime Ministers—if only they attended our proceedings—general councils and other places. I think that we have unanimity on that point because we have had trouble with them in recent months.
I also agree with the right hon. Member for Down, South, the House will be amazed to hear, on the subject of outside Commissions. The transfer of power from this House to an outside Commission stuck, and still sticks, in my gullet, as we remember from the passage of the European Communities legislation, and that wound is still there. We have not yet found a cure. It will be our main task in the House over the next two or three years to try to see how we can discover a cure which returns to this House some of the authority and control taken from us by that legislation.
When the supremacy of the House of Commons was established in the seventeenth century, some of the most far-seeing said "One cannot have two or three types of supremacy. One can have only one supremacy." I believe that it should be our purpose in this House to re-establish the supremacy of the House in all these matters. That is what I wish to see. It is not solely a matter of what we do in this House. It is also a question of how we enlist the allegiance and the affection of people in the country for this House of Commons.
I believe that there has been a deep estrangement in some degree over recent months or years, and indeed over a longer period, between this House of Commons and people outside. That estrangement must be overcome. In years gone by there was a deep affection


among the British people for this House. If it has declined, it is our responsibility as much as it is anybody else's.
In the coming months and years I have not the slightest doubt that the first test whether the House of Commons will have done its duty—this is to return to the question put to me by my hon. Friend the Member for Bolsover (Mr. Skinner)—will be in seeing whether we are able to exert our authority sufficiently strongly and imaginatively to deal with people who are being thrown out of their jobs or who fear that they may lose their jobs. Of course, that is what we must do.
We have sought to deal with that matter in the difficult circumstances in which we have been engaged in recent months, and, indeed, in the past two years. I do not wish to base anything on the latest unemployment figures, because it would be cruelty carried to an unnamed degree of callousness to build too much upon them, but they show the first beginnings of an improvement. Those improved figures are partly due to some of the measures which we put through the House in September and October and at the beginning of the year. Our reckoning is that the measures introduced then—I know that some of my hon. Friends were not enthusiastic about them and required something much more, as I do—have already saved the jobs of something like 100,000 people, including people in training. The further measures, some of them included in the Budget, can add another 100,000 over the next 18 months to those figures. I know that that is not sufficient to deal with the problem. There will still be a severe problem left, even if all of those figures materialise.
I know also, as everyone can see by reading what is happening not merely in this country but in the whole of the Western world, that technological advance produces more, nor less, unemployment. All of that means that we must ensure that we get a much more imaginative series of measures for dealing with the whole issue. I want to see those policies in action just as much as any of my hon. Friends. I want to see the expansion of the whole of the British economy—as soon as we can do it safely, without plunging ourselves back in the same kind

of inflation that has contributed to so many of our difficulties.
If the House of Commons is able to produce that expansion in these coming years, if we show that this is our passionate determination, we shall be starting to restore the authority of the House of Commons in the country. It will be an authority based not on demanding that people should bow down and worship some monument called the House of Commons but upon our being able to prove to people that ours is a better institution for overcoming these problems than any other in the world. I believe that it is so. I believe that this country, despite the derision which we get from some quarters, has a better chance, owing to its democratic institutions—with Parliament among the leading institutions but with others to assist—to do this. We have the most deeply-rooted democratic institutions of any country in the world and because of that we have a better chance of solving these problems than any other country in the world. It is in that spirit that I believe that the House should support the Government, the Budget and the policies I have sought to describe.

4.12 p.m.

Sir Keith Joseph: The Leader of the House has chosen to put the main argument for the pay policy component of the Budget in general terms. He has put the case elegantly—as perhaps no one else could. I submit that this pay policy component of the Budget cannot be considered on its own. I propose, therefore, to try to go a little more deeply in an analysis of what the Chancellor's proposals add up to in total.
We have a temporary Chancellor, a temporary Foreign Secretary, a temporary Home Secretary, a temporary and new Leader of the House—

Mr. Ronald Atkins: And a permanent Opposition.

Sir K. Joseph: I begin by congratulating the Leader of the House on his notable appointment and wish him a short stay in the job. Although we have some temporary and provisional top Cabinet appointments, alas, the uncomprehending vendetta of Socialism against the wealth-creating, prosperity-creating, job-creating, poverty-destroying, social


services-supporting, private sector continues.
It is true that the Chancellor has introduced into his Budget a few mitigations here and there. In comparison with the underlying forces in the economy—the delayed effects of money supply trends and the weight of borrowing, and, in comparison with the underlying attitudes of the people—fostered on anti-enterprise Socialism—this Budget is of minor importance. It is these underlying forces that are wrecking this country.
A common judgment of the Budget is that the Chancellor, perceiving rising demand for exports and for restocking, will, nevertheless, not make way for this rising demand by cutting public spending. Although it has proved practicable, with the help of foreign loans, to finance in a fairly deep recession the borrowing requirement of last year, to finance it this year as demand rises and savings fall, as business uses more of its own liquidity, will impose, we believe, intense debt management and money supply problems.
The formidable assessments of my right hon. and hon. Friends are on the record. I shall touch on some subjects already covered and on some new ones. In all—without taking longer than the right hon. Gentleman—I want to try to get in some comments on inflation, crowding out, so-called spare capacity, incomes policy, trade union responsibilities, public spending and what the country needs. I shall go as quickly as I can.
Inflation and jobs are rightly the Government's priorities. We can judge their strategy to deal with them only if we can identify the causes and cures. No one doubts that the cause of inflation is excess of demand over supply. No one doubts that rising costs can lead to higher prices—what is called cost-push. But while individual prices can be forced up by cost-push, there can be no general rise, which is the definition of inflation, unless demand—that is, the money supply—expands to allow it.
The pseudo-Keynesians and the Treasury focus on cost-push, claiming that Government have to accommodate the resulting price increases. The so-called monetarists deny that Governments are so compelled. The cure, say the pseudo-Keynesians, is to stop costs and prices

rising. This, say the monetarists, is to tinker with the symptoms rather than tackle the causes. It will not cure inflation but will have damaging side effects. The cure, say the monetarists, is to control the level of demand, the money supply.
The pseudo-Keynesians assert that the level of inflation at the end of next year will depend on what wages and imports do over the next 18 months. The monetariests argue that the level of inflation at the end of 1977 will be determined by the trend of money supply during 1975 and 1976, because there are time lags involved. The money supply has appeared to be contracting recently, but in real terms, and taking into account the huge Treasury bill sales recently, the contraction has been dangerously slowed. As the rate of inflation decelerates later this year, the prospect of a real expansion of money supply increases.
The Leader of the House might well say that this is all very interesting. But it is more than that. I am sure that we all appreciate the presence of the Prime Minister listening to the opening of the debate. We take that as an encouraging sign. I hope that he will not dismiss this argument as boring or irrelevant. Upon the analysis of the cause of inflation and unemployment depends the likely effectiveness of the Government's policies for curing inflation.

The Chancellor of the Exchequer (Mr. Denis Healey): The right hon. Gentleman has rightly quoted the monetarists as arguing that there is a two-year time lag between an excessive increase in the money supply and its full consequences for inflation. On the last occasion that we debated this matter the right hon. Gentleman conceded that there was at least one year and said that he was uncertain whether there was a second year. He now seems to be supporting the monetarists' analysis. It would be interesting to all of us—because the last great increase in money supply was in 1973 and its consequence upon this argument is still being felt—to know whether that is so.

Sir K. Joseph: I wish that the Chancellor would rise above these party points. The whole House will accept that I have been guilty to a fault of taking a share of responsibility for the


impatience with which the previous Government tried to reduce unemployment in 1971–72—an impatience which the Chancellor is apt to castigate now but the results of which he may well be copying, inadvertently perhaps, with desperate consequences for this country in a year or two. No one can know the lag that works on the money supply. It is somewhere between one and two-and-a-half years. It is impossible to be more precise. There is a lag. There are consequences.
Treasury-watchers observe with anxiety the obstinate survival of what many people regard as the exploded pseudo-Keynesians' error in the analysis it gives to the Chancellor. The Chancellor seemed to have been ahead of the Treasury a few months ago. His speech of 2nd September to the IMF contained equal components of, admittedly incompatible, pseudo-Keynesian and monetarist analysis.
There was a brilliant and penetrating article by Peter Jay in The Times two days later pointing out the inconsistencies of the Chancellor's IMF speech. Alas, the Budget shows the Chancellor to have regressed. He is still using inconsistent arguments. His Budget speech was intellectually incoherent but, since September, he has come to lean more heavily on the pseudo-Keynesian side. Perhaps he is more monetarist in Washington and more pseudo-Keynesian in this country. He still pays lip service to money supply but his focus on incomes policy is expressed as if the money supply has no function. The Chancellor appears to have no clear, coherent, intellectually consistent grasp of the cause of inflation. Therefore, his policy, and that of the Government, lacks validity. I shall return to this point later after clearing some essential preliminaries.
We do not dispute that this should be virtually a standstill year in terms of overall consumption. The Chancellor said "a 1½ per cent. increase in consumption" but the Prime Minister at the weekend I think said "no increase in consumption." It could turn out to be anything from a further sharp fall in real incomes to a sharp rise, according to the Chancellor's grip on public spending, borrowing policy and the terms of trade.
However, the Chancellor's aim of minimal, if any, rise in real living standards

must be right. The party is over—yes, but the party has to be paid for. If the money supply is to contract to abate inflation as the Chancellor says when he is wearing his monetarist hat, then anything but very modest pay increases or, rather, any increase in unit labour costs will squeeze already desperately low profits and will price people out of jobs. There will be no escape from such a standstill in consumption, or even a fall this year, if we are to abate inflation and cut unemployment.
The Government's Tribune critics could not escape such a result. We could not avoid it if we were the Government, though we would create more encouraging conditions for progress later. Our argument is not that the Government have been too stringent. It is that they are taking too many risks. The Chancellor hopes for, and expects, a strong revival in the private sector, exports, Stockbuilding and later investment. Yet he is already borrowing up to the hilt of the £12 billion borrowings he pledged in his IMF speech.
When the recovery comes, there is a real danger of a collision between the need for funds for the public sector borrowing requirement and funds for industry. The Chancellor may be forced to cut public spending in a crash stop or to abort the industrial recovery, investment and extra jobs by sharply higher interest rates or heavy special deposits to curtail bank credit to industry. The only other course for him would be to let the money supply rip, with new inflation following a year or so later on top of a much higher base than in 1972.
It would be a tragedy for the country and, incidentally, for the Chancellor, if after all his condemnation of the previous Government, that were to happen. Yet this is the scenario—much higher inflation in 1978—that many people fear. No doubt, my hon. Friends will perhaps reflect, an election would be called before the worst became obvious.
These fears are reinforced by the suspicion that the Chancellor is no longer so attentive to money supply. The Chancellor rightly forswears reflation because, after a lag, it would make inflation and unemployment worse. Yet he is, in fact, reflating. The public sector financial


deficit, without the £700 million additional tax cuts—even reducing the debt interest to allow for its lower resource cost—is not down as much as inflation and is pumping money into the system.
Not only has the Chancellor left himself no room for manoeuvre; he has also deceived himself into thinking that there is much spare capacity.
I suggest to the Chancellor, and to the Government, that there is likely to develop quickly an acute shortage of vital skills in many parts of industry. This applies to technicians—draughtsmen, designers, industrial engineers and test engineers. It also applies to technologists—development engineers, systems analysts and software engineers. It applies to craftsmen in the engineering trades—toolroom skills, fitters, pattern makers, electronic wiremen, testers; and to engineering and science graduates.
These are very serious potential shortages. There has been a low intake of British students into university science and engineering departments because of poor teaching and anti-industry influences in the schools, and poor recruitment into industry from universities.
I have the speech by Lord Bowden, recently a Minister in the previous Government, pointing out those facts and I take my evidence from his speech. There has been poor recruitment by industry into training categories in recent years because of the pressure of inadequate profitability. There has been a loss of craftsmen to non-industrial employment, recently seriously exacerbated by the £6 pay policy. There has been a loss of technicians and technologists to the State sector which now offers significantly higher salaries than the private sector can afford without the pressures and risks of private industry. There has been a loss of experienced skilled people to other companies as employees move to circumvent pay policy.

Mr. Tam Dalyell: Apart from Lord Bowden's speech, which was highly controversial, what evidence is there for the right hon. Gentleman's sweeping statement that there are anti-industry attitudes in the schools? It is simply not true.

Sir K. Joseph: One has only to ask most boys at school. One finds that the impression given them of industry is that it is relatively grubby and squalid. This is a widespread factor to be taken into account and it is doing this country great damage.
Moreover, the attraction and retention of able people in industrial management is undermined by this Government's actions against management. Graduates go to the professions and to the State sector. Some able graduates emigrate. Those who remain are demotivated. No other major country pays its managers net of tax so poorly both relatively and absolutely. Now, in the Budget, we have the mean victimisation of managers about their cars. I do not know whether the Chancellor has yet said that the users of cars in the State sector will be similarly treated. I understand that he confirms that he has said so, and in that case I withdraw that question.
Part of the spare capacity which the Government are taking for granted will be available to meet the upturn has been voting with its feet. Part has, as the Russians say, internally emigrated—that is, opted out. These self-imposed losses cannot be quickly remedied. They deserve a debate on their own. They should be considered when Ministers assess the scope for expansion and they should be borne in mind when considering incomes policy.
On incomes policy, very few hon. and right bon. Members in this House have consistent records. I am not included among those who have been consistent. Today I will not argue the case for or against incomes policy as such. [HON. MEMBERS: "Why not?"] Because I shall deal with those parts of the policy argument relevant to the Budget and the Government's policies.
Most people, including supporters of incomes policy, agree that incomes policies cannot last long and that the second stage is harder than the first. They agree that it is easier when it works with market forces than against and that differentials get squeezed and reassert themselves later. Trade union leaders are bargainers. Incomes policy has to be paid for. The question for the Government, the House, the country and the Leader of the House is not only whether


incomes should be regulated in a free society, not only whether incomes can be regulated, especially in an upturn, but what the price of regulating them turns out to be. Trade union leaders are bargainers, and many, being political, bargain across a wide spectrum. They bargain about money, subsidies, more public spending or fewer cuts in public spending, rent levels and school meal prices. They bargain about the economy—import controls, price controls, dividend controls. They bargain about social issues—pensions. They bargain about political issues—salary ceilings, the closed shop and job protection.
I am not saying that the trade union leaders are not entitled to those views, but the pursuit of a voluntary incomes policy leads to bargaining on a far wider than incomes basis and the resulting package invades the sphere of many other interests and of Parliament. After all that, the TUC cannot guarantee results. We are, mercifully, still a free country to that extent. It can only try to persuade. Therefore, as my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) said, Ministers may undertake to introduce policy changes which should not be made in return for promises which may never be fulfilled.
We must surely judge incomes policies, therefore, not only on the inherent sense, or nonsense, of them economically, but also on what is paid to obtain them. The Leader of the House leaned heavily in his argument on the acceptance on the £6 pay limit. But the House should remember that the Bank of England commentary pointed out that inflation had peaked before the £6 policy was articulated or accepted because of the lagged consequences of money supply contraction over the previous two years. Many obtained a £6 increase which they would not but for the norm have received, and it was paid for at a very heavy price in terms of public spending commitments, as the hon. Member for Bolsover (Mr. Skinner) reminded the Leader of the House, in legislative commitments such as the Trade Union and Labour Relations (Amendment) Bill, and in all sorts of other commitments which the public have had to pay for and which, in effect, in total have probably been far more inflationary than the £6 limit.
Moreover, many people feel that the Chancellor of the Exchequer should not contract out part of his Budget to any interest. My right hon. and hon. Friends have put it vividly. It is one thing for the Government to inform themselves or even to consult many other interests, but here there is more than information and consultation: here is bargaining, and bargaining over a wide political field. The Government should not bargain about the Budget with one interest group.
It was the hon. Member for Roxburgh, Selkirk and Peebles (Mr. Steel) who, in an excellent article in The Times this morning, asked what hon. Members on the Government side would have said if the Chancellor of the Exchequer had announced that he would discuss the level of profits with industry and with the CBI and that, as a result of those discussions, he would in due course fix corporation tax. Would hon. Members opposite have been so happy? No. They would have said that that was bargaining and that it diminished the rôle of Parliament.
We must recognise, therefore, that, despite the examination by the Leader of the House of the origins of the word "corporatist", there is something in the corporatist flavour which many people have seen in this initiative by the Chancellor of the Exchequer, because what the people, and perhaps the Leader of the House, do not bear in mind is that trade union leaders bargain on many other matters than income when they discuss voluntary incomes policies.

Mr. Neil Kinnock: The right hon. Gentleman is a man of great intelligence and originality—[HON. MEMBERS: "Hear, hear."]—wait for it—but in the matter of the relationship between the trade unions and their power and the Government he is something of an ignoramus, because what the Chancellor of the Exchequer offered the unions was responsibility and no power. It is nothing like a corporate State, but it is making assumptions about the loyalty of the trade unions which they are not in a position to deliver. That is what is wrong.

Sir K. Joseph: I am coming precisely to that point.
Some will accept part or all of the analysis which I have given but may


still commend the initiative of the Chancellor of the Exchequer because they think that he is, cleverly or wisely, depending on one's point of view, putting responsibility on the trade union leaders to match their power. I understand that thought. I am all in favour of putting responsibility on the trade unions for the consequences of their actions and policies. But are the trade unions responsible, as the Chancellor of the Exchequer appears to believe, for inflation? Surely they are not directly responsible. Wage controls and incomes policies will not on their own abate inflation.
The Economist—not a paper whose economic views I normally now admire— is strongly in favour of an incomes policy, but even that publication this week stated that incomes policy will work only
if a sufficient control over money supply allows it to be enforced.
As we are discussing a "voluntary" incomes policy, plainly the word "enforced" is inapt. But the indispensability of contracting the real money supply is the point. One could beat inflation by money supply alone. I am not arguing that today. One could certainly not beat inflation by incomes policy alone. To get a voluntary incomes policy, one must make concessions—financial, economic, social, political, or even, heaven help us, on defence—which either wreck the money supply control or do other damage to the country.
I understand the desire of Ministers to have the Trades Union Congress with them. I understand the desire of employers and managers to avoid bitterly disputed wage bargaining, often involving nightmare inter-union conflict. The Government want the unions to make sensible wage claims, and they want the unions to accept some responsibility. That makes sense. Employers and managers want sensible bargains with unions on pay, and also on productivity. But incomes policy is not the only, or necessarily the right, way to achieve those purposes.
I am not today arguing for or against incomes policy. I am stressing that there is always a price tag to be evaluated; and I am stressing that no pay policy makes sense without strong money supply control.
We aspire to being a free society. One of the freedoms is for workers and managers to seek the best bargains they can in the labour market, as they see it. I hope that the Leader of the House agrees with that.
In pay negotiations and productivity and manning discussions, all unions should take into account the condition of the employer, the state of the market, the employer's profit and profitability, and the risk of job loss. They should also know—and this is crucial—that the Government will not rescue jobs if the men concerned cripple their employers, nor expand the money supply to float their firms or employers out of trouble.
Unfortunately, the Government have taught precisely the opposite lesson. Look at British Leyland, Chrysler, and the sequence of rescue operations, not all of companies which have been crippled by excessive wage claims or lack of cooperation, but including some which have. Here is a responsibility that can legitimately be placed on trade unions. Some of them sometimes cause some unemployment when they price, or strike, or obstruct their members out of jobs. They are not directly responsible for inflation.
The Chancellor of the Exchequer should say to the TUC "We shall continue to contract the real money supply, to squeeze out inflation, so that we can revive prosperity and fuller employment. We shall not rescue jobs put at risk by wage claims or lack of co-operation. We shall pin on you, the trade unions, the responsibility for any such job losses". This is much more within the power of the trade unions to deliver. It is valid, and, far more than an arbitrary pay limit, it both is and is seen to be in the interests of trade union members that they should be warned of the risk of pricing themselves or others out of jobs.
So, the Government are running huge risks with inflation. Ministers are assuming spare capacity which, so far as many labour and management skills are concerned, just may not be available, and they are leaning more heavily on incomes policy hopes than on the more solid support of money supply control or of the workers' interest in not pricing themselves out of a job.
One of the main reasons that the Government have landed themselves and the


country in this plight is that they will not cut public spending. The public sector borrowing requirement, even after adjusting for the lower resource content of debt interest, is 30 per cent. up on the estimate for last year. The public sector finance deficit is as high, at 8½ per cent. of gross national product, this year as last year, even though the rate of inflation has tumbled. The public sector finance deficit is pumping liquidity into the system just at a time when money supply should be contracting.
The Government have not shown that they can control public spending—now at 65 per cent. of GDP. Cash limits should help, but often in the past estimates have been exceeded. Despite this huge spending, there is virtually no relief in the Budget for the really hard-hit—the elderly living on small investment incomes or people caught in what will be a more severe poverty trap.
The Government answer to the plea to cut public spending is always that this will increase unemployment. I tried to explain to the then Paymaster-General in our debate on public expenditure that there were two aspects to cutting public spending and using the resources to reduce borrowing and cut taxation. One is the delayed revival of the private sector, which would certainly take time, before jobs were increased and the other is the diminished dismissal by the private sector of people they would have had to dismiss to pay the taxes to meet the public expenditure.
The Paymaster-General did not take that argument, so I shall put it again in one sentence. With public expenditure at its present level paying for overmanned steel works and other nationalised industry overmanners it is a case of keeping the public sector Peter at the expense of causing the private sector Paul to be sacked.
There is no legitimate argument that cutting public spending and using the proceeds half to cut borrowing and half to cut taxes would cause unemployment to the same extent. Even if some extra unemployment were to result, the consequences of not cutting public expenditure could be so catastrophic for inflation and could create so much extra unemployment later than it must be right to cut. As the Chancellor of the Exchequer

well knows, it takes time to cut effectively. If he is to get the cuts when the recovery occurs, he ought to be starting them now.

Mr. William Molloy: Does the right hon. Gentleman not agree that even if his plea for a massive slashing of public expenditure were carried out, this could have a grievous effect on private industry, so much of which, particularly in the construction of schools, hospitals and roads, depends on a large element of public enterprise?

Sir K. Joseph: The hon. Member is precisely right. Public expenditure cuts interact on the private sector and to that extent they release resources for export and import substitution within the market.
If the Government will not cut soon, some of us fear they will be forced to cut before long by events. As my right hon. and learned Friend the Member for Surrey, East said at the weekend, we shall have July measures and an autumn Budget for lack of Government action now and by then we shall unnecessarily have lost resources, time and more self-confidence.
If it is a case of my predictions against those of the Leader of the House, I would remind him of a television discussion we had in the October 1974 election. I predicted—and he denied—that if a Labour Government were returned to office, he would find himself presiding over the largest post-war upsurge of unemployment. That has been shown to be true.
The upturn may be faster. We may, because of the lack of skills, not be able to expand exports enough. The labour market is already giving faint hints of tightening. The reflation the Government have allowed by maintaining public spending will be exploding in home consumption and a swelling of imports.
Meanwhile, the Chancellor of the Exchequer has invited the world to watch the incomes policy negotiations which he has ill-advisedly put in the centre of his strategy. The world will react to every bargaining move and will distrust the Chancellor's no doubt genuine determination to control the money supply.
My right hon. Friend the Leader of the Opposition said last week that the pound had fallen a cent against the dollar every


week between the Chancellor's 1975 and 1976 Budgets. Since the 1976 Budget, the pound has fallen not by a cent a week but by about a cent a day. The pound will continue to suffer. Leads and lags will continue to operate against us. If the fall continues we could find ourselves stuck at the bottom of a series of ever-worsening "J" curves.
Our position is not so desperate that it cannot be put right, but sustainably changed attitudes will be essential. My right hon. Friend the Leader of the Opposition has spoken of the feverish anaemia from which the country is suffering and my hon. Friend the Member for Henley (Mr. Heseltine) has said that tinkering with industrial intervention will not help.
The reality is that Socialism destroys wealth and puts nothing in its place. It makes bigger demands on the country's wealth than ever before while, at the same time, doing more than ever to destroy the wealth-creating process.
Who is to create the wealth and the jobs—Ministers, civil servants, nationalised industries, the National Enterprise Board, British Leyland, Upper Clyde Shipbuilders? This is laughable. All these will be consuming wealth. Who will create it? There are people of all backgrounds in all sizes of organisation who are good at creating wealth and jobs for the country. Other countries encourage such people. We scorn and denigrate them. Other countries send their wealth- and job-creators out like tigers—encouraged, well-fed and valued, but still hungry for more. We strait-jacket ours. The policies that this country needs would involve an acceptance by British Socialists—as their German counterparts have accepted—of the imperatives of freedom and prosperity.
We have to move, over a period, by cutting public spending to a balanced, full employment Budget. We have to restrain the growth of the money supply until it coincides roughly with our underlying rate of growth and adjust budgetary policy to match. We have to price ourselves into fuller employment with a rising share of the world market.
We have to drop further nationalisation, intervention and rescues. We have to facilitate mobility by changing housing policy and remove price and dividend

controls to enable profits to rise and we must explain their indispensability for expansion and progress. We have to encourage enterprise, invention innovation, risk-taking and work by cutting taxes. We have to reform the relationship between taxes, benefits and earnings in order to reduce the poverty trap.
Above all—and this is a job the Government could put high on their agenda—we have to educate wage earners and trade unions on the links between pay, productivity and jobs. I think the Chancellor is making an effort to start this particular link.
These changes would involve undoing a century of Socialist error. On this side of the House, we have learned much and adapted—perhaps over-adapted. Why should not Socialists learn and adapt? Only such policies will truly raise the income of the low-paid, as the Leader of the House so seriously desires, without squeezing the others by more than they will be ready to endure.
The Leader of the House and his Friends have devoted their lives to sawing at the branches on which they and the country are sitting—the branches of the tree of freedom and free enterprise. They depend upon each other and upon them all the public services also depend. The branches are near snapping, but it may not be too late. Let the right hon. Gentleman learn what his Socialist colleagues in Germany seem to have learnt. Free enterprise in a competitive, but comprehending, climate is the best friend of all, including the workers. It is the ally of the social services, the destroyer of poverty and the decentralised source of real freedom.
Monetarism is not enough. Cutting public spending, more and sooner than the Government plan, is not enough. There have to be adequate profits and incentives at all levels of income. This country is suffering from Socialist anti-enterprise attitudes. Until they change, the underlying evils which this Budget intensifies rather than mitigates will continue to demoralise and debilitate us. I urge my hon. Friends to vote against the first Resolution tonight.

4.49 p.m.

Mr. Norman Atkinson: The claim that the right hon. Member for Leeds, North-East (Sir K. Joseph) has


a tiger in his tank does not ring true in the light of the theoretical contradictions to which he has treated the House.
He said that all economists were agreed that inflation was the result of demand exceeding supply. If his thesis is based on that theory, how is it that the Western world has suffered such enormous unemployment during a three-year period when demand has been so much in excess of supply? The right hon. Gentleman cannot have it both ways.

Sir K. Joseph: The hon. Gentleman forgets that the consequences of unemployment and inflation follow one to two-and-a-half years later and, therefore, unemployment can coincide with inflation.

Mr. Atkinson: That is not true. The right hon. Gentleman will see from the figures for the period leading up to August 1975—when we reached a maximum 27 per cent. rise in the price index—that there was an enormous increase in unemployment. Jobs were starting to spill out of industry rapidly as we moved towards that time. Indeed, the Chancellor and the then Prime Minister described inflation as being the mother and father of unemployment because the rise was so rapid. The right hon. Gentleman will have to go back to the Centre for Policy Studies to get his theory right before basing his whole argument upon it.
My right hon. Friend the Leader of the House told us what we can expect during his period of office. It sounds very exciting. He went on to say that the whole basis of the Government's policy was to defeat inflation. I am sure that all Government supporters will agree with him and totally endorse that basic purpose, that one overwhelming priority, which should motivate us all when coming to conclusions about the Budget and the policies to be pursued. All Government supporters will also endorse the proposals to protect the low-paid.
The Leader of the Opposition described imported inflation by the process of devaluation as the rest of the world sitting in judgment upon the Labour Government and their policies. She claimed that the fact that the value of sterling had fallen by one-third over six years lay at the door of the Labour Government. That is not a judgment taken

by the rest of the world. It is the currency manipulators, currency speculators and currency dealers—most of whom are British and most of whom occupy desks in this country—who are pontificating about our industrial performance as though they had special knowledge of it, whereas they are totally removed from industrial experience and have no valuable comment to make. Those people in the essentially privileged position of being able to adjust exchange rates, because they disagree with what the Government, industry and the trade unions are doing, say that they have no alternative but to make money for themselves by reducing the rate of exchange and devaluing sterling to correct the performance of industry.
It is time we looked closely at the performance of currency manipulators in the City to see whether they have a valuable contribution to make.

Mr. Tim Renton: The hon. Gentleman seems to be speaking from the depth of abysmal ignorance. If Nigeria, Hong Kong or the OPEC countries sell some of their sterling reserves because they think that sterling will be lower in a few months' time than it is today, what has that to do with bankers or anyone else in the City or in Britain?

Mr. Atkinson: Because, as I suspect the hon. Gentleman knows, it is on the advice of the managers of their sterling holdings that such action is taken. The Arabs would take advice from the City of London on whether to dispose of their sterling. The disposal or otherwise of sterling holdings is directly related to discussions which take place in the City. I hope that the Leader of the House will set aside time in the not-too-distant future to examine closely the whole question of currency exchange.
For 10 years I have campaigned for the incorporation of the road fund tax in the price of petrol, and I am sorry that the Chancellor has rejected that proposal. The Chancellor says that he cannot abolish the road fund licence system at the moment and incorporate the tax into the price of petrol because that would create an enormous demand for small horsepower cars. There may be something in that argument, but the Chancellor has the responsibility to announce that the Government intends to bring


about that change and to say when it will be done. He should say "Yes, we are concerned about this, and we want to shift the burden of the road fund tax from the block payment system and to include it in the price of petrol." If the Chancellor announced that as an intention, the manufacturers of small cars and engines would be able to adjust their future programmes accordingly. I hope that the Chancellor will go further and say that he will also incorporate the cost of third party insurance in the price of petrol. To add about 6p per gallon to the price of petrol to include those two payments would be a popular move.
The Chancellor dealt at some length with tax evasion. There is no way to overcome that problem except by decisive action. Many thousands of millions of pounds are lost in this way. There is no method of calculating the Exchequer loss from tax evasion by cash buying and selling, employing people on lump agreements, and so on. The only action which could be taken is for the House to decide to put an end to cash payments of amounts above, say, £50. There is no way to solve the problem of tax evasion other than by making it illegal to make large cash payments.
It is wrong for the Chancellor to say that he wants intrusion powers to examine accounts unless he also takes power to stop large payments in cash. Information on such payments will not be found in the accounts. The Chancellor does not need to inspect accounts which will not give him the information he requires. I ask the Chancellor to set up a study group to examine the consequences of making it illegal to pay in cash sums of, say, more than £50. That is the only way to overcome tax evasion.
I wish to put a point of view which I hope that my right hon. Friend the Leader of the House will take into consideration when continuing and possibly bringing to a conclusion the talks he has initiated with trade union leaders. What has happened to the purchasing power, earnings and standard of living of wage-earners in the period leading up to these discussions? I take August 1974 to August 1975 as a convenient period over which to look at these things. I take as an example the average wage earner, whose take-home pay was £44 in August 1975. He will have lost in that year

about 3 per cent. of his purchasing power, leading up to the climax of a 27 per cent. rise in the retail price index in August 1975.
But the crucial year is August 1975 to August 1976. That provides the background against which the workers will judge the Budget policies. It has been one of disaster for them. Yet they have made a tremendous contribution—if that is what it is—towards our economic recovery.
Again taking the parabola and the rise of the Retail Price Index at 17 per cent. year upon year, rising by 27 per cent. in August last year, coming down to about 15 per cent. by August this year, the worker on an average of £44 take-home pay—about £2,288 a year—over the year ending next August will have to receive in take-home terms, in cash in the wage packet, about £470 in order to maintain his purchasing power.
Under the £6 flat-rate agreement, he will get nothing like that. Therefore, his take-home pay will be considerably less than the amount required to maintain his purchasing power in the year ending next August. No doubt my hon. Friend the Financial Secretary, who is good with a slide rule, will correct me if I am wrong, but he knows that, at the £6 flat rate level, that average worker will only get about £190 in take-home pay to offset an increase in the cost of living, albeit a decelerating rate in the rise from 27 per cent. to 15 per cent. To offset his need for £470 in order to maintain his purchasing power, he will get no more than £190.
That average worker, therefore, will have suffered a drop in his purchasing power of about 12 per cent. over the year—an enormous drop of nearly one-eighth. My right hon. Friend the Leader of the House is right to point to the difficulty of selling the policy, the difficulty that trade union leaders will have to get their members to accept it. If workers know nothing else about wages, they know the value of the money in their wage packets. They know precisely that a one-eighth drop in their living standards is of tremendous significance to them and their families.
Now, the Budget is trying to sell them a further decrease in their purchasing power on top of all that. The Government called upon the workers to give


a year for Britain. They have done so. They have given up one-eighth of their purchasing power. It will be very difficult to sell them another such policy for the year August 1976 to August 1977 because, no matter how one looks at it, it means a further drop in their living standards.
That is the sort of situation which trade unionists and wage earners have to consider. They have to consider how they are to be able to help the nation and once again make a contribution to overcoming some of our difficulties, but in the year ending next August the average lad will lose something like £280. How will he face the Budget policy?
Let us look at the retail prices August to August. We assume that the rate of inflation will be about 15 per cent. this August, falling away to 9 per cent. 12 months on. That is the background against which trade union leaders will consider the situation. Let us again take the example of my lad on £44 average take-home pay in August 1975. Because of the £6 limit, he will be on about £2,500 in that year in take-home terms. What does he want, again with a decelerating price increase over the year? What does he need to maintain his living standards? He wants an average throughout the year of about £5·20 in cash in his wage packet each week. The discussions to be held must be against that background.
The trade unions may say "We will not recoup anything from the past—that was our year for Britain; it is water under the bridge". But one cannot say that once more a contribution in terms of a drop in living standards must be made. It is not "on" to talk in terms like that. It is estimated that a 3 per cent. take-home would be about £1·20 a week on average earnings, and obviously that is not enough. The Treasury says that the workers can make up the rest in tax allowances, but those allowances would have to be enormous—far more than the allowances spoken of in the Budget—for them to maintain living standards.
If what the Treasury says is the case, a lot more will have to be offered than he figures set out in the tables. I have not time to go into an analysis of the figures suggested by the Government, but

they must be higher in order to give the take-home yield I am talking about before trade unionists will be prepared to discuss the matter seriously.
What is the weakness of offering tax allowances in lieu of wage agreements? We are taking pressure away from wholesale prices and manufacturing by doing it in this way and that must be good in itself. But the overall effect is regressive. It is against the interests of the Government and of trade unionists as a whole to allow it to happen. By its very nature, it cannot be redistributive and it must be regressive. We have always argued against that background.
If the Chancellor had chosen tax allowances instead of a £6 limit this year, he would have found that the effect was totally anti-redistributive in every sense and was regressive. Therefore, it must be against our interests to argue that it is possible to have an equivalent wage increase in the form of tax allowances when it has such damaging effects upon the remainder of our policies, whereby we hope to gain from tax collection a redistributive influence in the economy so as to help the lower-paid workers It is because it is against the interests of those workers that I object to the idea of using the tax method to make this money available.

The Financial Secretary to the Treasury (Mr. Robert Sheldon): I fully understand the point and accept the work that my hon. Friend has put into establishing it. However, although it is true that in the past tax cuts tended to be regressive, when most of the people to whom my hon. Friend refers are now paying income tax at the same standard rate, any increase in allowances benefits them all. Therefore, the regressiveness of increasing tax allowances has been substantially avoided.

Mr. Atkinson: I am sorry, but I cannot accept the Financial Secretary's arithmetic. My evidence is the social security reports of investigations of benefits available to wage earners, in whatever form. Some of the figures from the last survey, although it was a couple of years ago, show, on no matter what examination that this cannot be other than a regressive move. I am sorry that I cannot go into detail, but perhaps at some stage I could


take the Minister through the calculations and the reasons for them.
If we are serious about the decrease in unemployment that we want, over the next four years the public sector will have to provide about a million extra jobs. If we achieve the suggested rate of investment in manufacturing industry, most of it in private ownership, over that period, this must mean a small labour content. There must be a shift towards capital intensiveness in manufacturing industry, so it will not provide a substantial number of extra jobs. The same applies to public service industry. If we are to have the 600,000 extra jobs, the public sector will have to provide another million.
How will it be done? I know that some price increases in manufacturing will be offset, which may be a good thing, but if we start to decrease the revenue and resources available to create those extra jobs, we run up against a contradiction. It cannot work. We have the everlasting problem faced by Socialists when increasing the public sector—that of achieving the shift of resources to make the expansion possible.
Trade unionists will carefully consider the effect of the shift into taxation to maintain living standards against the need to create a million new jobs in the public sector. I am sure that they must conclude that it is against their interests to accept this shift of policy when they consider the consequent decline of prospects in manufacturing industry as it becomes much more capital-intensive.
I have tried to set out some of the reasons why wage negotiators and union leaders will examine the proposals put to them by this Government. Their conclusions at the end of the day must be a thumbs-down to this innovation of trying to use tax allowances as a substitute for wage increases.

5.15 p.m.

Mr. Julian Amery: I was abroad last week and in the circumstances would not normally have presumed to intervene in this debate. I feel impelled to do so only because of the contrast which I sense between the view of our economic situation taken abroad, particularly in Europe, and the complacency of Ministers and the Labour Party as a whole about the dimensions

of our economic crisis. Perhaps they are too close to the trees to see the wood, but this is an alarming situation—illustrated by the emptiness of the Labour Benches, not just when I am speaking but during other speeches today and, I am told, last week as well.
I have tried, when abroad, to defend the Government by pointing out that the Prime Minister in Cardiff and others elsewhere have talked about the gravity of the situation. But the reaction I received was that it was all just words; people smelled a climate of phoney war in Ministers' statements. As they see it, we are near the brink of disaster, we are at war—not military or civil war, but a war for the survival of what Britain has meant to them for years past.
Their attitude to sterling is the key indicator. The hon. Member for Tottenham (Mr. Atkinson) took the City to task for the advice he thought it was giving to foreign holders of sterling. That is rather a chauvinistic and superior view. Foreigners are not fools. They are perfectly capable of working out for themselves the pros and cons of holding sterling at present. Of course they understood that an inflation rate which grew from 9 per cent. in 1974 to 26 per cent. in 1975, with wage settlements at 35 per cent. or over, an inflation rate which on a year-on-year basis is still nearly 20 per cent., would lead to a downward drift in sterling. They did not have to be told by British advisers in the City to take that on board.
The anxious thing for us to have in mind is that their confidence in sterling has been shaken, not only by their memories of the past but by their forecasts of the future. In an unaccustomed statement, the Treasury has said that there is no justification for the present downward drift of sterling, but it does not look that way, on economic or political grounds, abroad.
People abroad have been interested by the Chancellor's proposals for a deal with the trade unions over wages and taxes. While I naturally share the reservations which some of my hon. Friends have on the constitutional implications of all this. I hope that the unions will accept the deal. But very few people think that they will. On the other side of the Channel, they do not think that it is "for real". With some experience of bargaining, with


Archbishop Makarios and the like, I think it unfortunate that the new Secretary of State for Employment should have indicated so quickly that the 3 per cent. target was a flexible opening gambit. It was too soon.
In the same way, there is grave doubt across the Channel about our forecasts of growth and export opportunities. I know that the Chief Secretary has said that we must be optimistic, but in Europe, and I think in the United States, we were respected previously because we went in for understatement. Our present prospecting is thought a little wild. When they look also at the fears of the dislocation, or cartelisation on OPEC lines, of raw materials, no wonder our friends abroad are a little exercised and concerned.
But their main concern stems from the size of the borrowing requirement. They know that there is no magical exit here. How will it be financed? There is clearly little likelihood that gilts can be sold to the domestic public on the same scale as last year. The only way they could be sold would be by a steep rise in interest rates, and this would conflict with the hopes of the Government of improving our industrial performance.
Another possibility is retrenchment-cutting back public expenditure which in the year 1976–77 is to run at 65 per cent. of the gross national product. But to cut this back to the level to which it should be cut would be a hard task for a Government of national unity. It will be near impossible for a Labour Government on their own.
There might be another loan from the International Monetary Fund. This would entail the acceptance of obligations which a purely Labour Government could hardly hope to fulfil. Foreigners see this clearly, so they fear that at the end of the day once again the Government will resort to the printing press in preparation for an early General Election.
These are straightforward economic calculations into which foreign holders of sterling have to enter. But we must add to those the political factors. It is very hard for serious men abroad to understand the timing of the last Prime Minister's resignation. They could not

help feeling that he was leaving the ship in good time. They find it very hard to understand the exclusion of the Home Secretary from the Foreign Office to which he was so eminently suited not only by his concern for Europe—it is only through Europe that we shall get out of our present problems—but also because of his experience at the Treasury in the past which would have stood him in good stead today. They are concerned that there will be a rise in the influence of the Left wing of the Labour Party.
If we add all these together, we find ourselves facing a crisis of Italian proportions. It is very similar to the crisis which the Government in Rome face today. But the consequences could be much more serious here because, unlike Italy, half our food and most of our raw materials come from overseas and, as the world economy begins to recover, the price of those raw materials will increase and the decline in the value of sterling will add to our problems day by day.
What should be done? We ought of course to cut the borrowing requirement and to cut it now. I am one of the older members of the trade union of sons-in-law, so perhaps I might draw the attention of the Prime Minister to what Mr. Peter Jay has written:
If the Government and all of us are to have better than a choice of dooms a year from now, then before the summer recess it is indispensable that the budget deficit for this financial year be cut well below £10,000 million, an unshakable strategy laid down for eliminating it by 1978–79 and a tight 10 per cent. growth ceiling put on the money supply".
We ought to cut back now before what is still just a floating pound sinks for good.
The alternative will be to go to the International Monetary Fund, and strings will be attached to the loan which it will be very difficult for anyone in this House to swallow, and especially difficult for the Labour Party. What is worse is that those strings by their very nature will be deflationary in character. We shall have a deflation imposed upon us while others are beginning to reflate again, and the gap between this country's economy and those of our neighbours in Europe will widen again to our disadvantage. The knife is at our throat.
The choice is whether we cut the deficit ourselves or have it cut for us. I do not believe that the Government will do it. I fear that they are heading for the greatest crisis since 1931—a greater crisis in many ways because in 1931 we were still the leaders of a great Commonwealth trade and payments area. I do not believe that there is any alternative to begging for another loan. I do not think that there is much chance of acceptable terms or of fulfilling the obligations unless confidence abroad can be restored.
How is confidence to be restored? It will call for a measure of humility on the part of the Government which they have not yet shown. They have to realise that they are a minority in this House and in the country, and they have to devise a national policy which will command the broad support of this House of Commons—of the Opposition parties as well as the majority of their own supporters. This cannot be done on the basis of their manifesto. It has to be done on the basis of a new pragmatic programme to ensure our national survival in this year before it is too late.

5.25 p.m.

Mr. Kenneth Lomas: This is the first opportunity that I have had, Mr. Speaker, to speak under your guidance. I offer you my sincere congratulations on your appointment and my thanks for the valuable work that you performed before it.
I have been away from the House for some time because of illness, but I have read the debates which have taken place here. All that I can find from the speeches of Opposition Members is that they want to slash or to cut public expenditure, yet they are not prepared to say where. All that I understand from their arguments is that they wish to increase the amount of money that we spend on defence, without saying where the economies should be made.
I am one of those who had the opportunity to serve for some time in the North Atlantic Assembly. I appreciate our obligations under the NATO Alliance, and I understand the problems with which this country is faced. I am not in favour of cutting our defences more than we should. On the other hand, I believe that statements by the Chancellor of the Exchequer and the Secretary of State for

Defence have made it abundantly clear that we are now at the bone and that we can get no nearer. In other words, we must maintain our present level of defence expenditure.
The right hon. Member for Brighton, Pavilion (Mr. Amery) again spoke about the need for cuts in public expenditure. Like others before him, he did not suggest where they should be made. I happen to believe that, if we are to have services which the nation wants, we must be prepared to pay the price for them whatever form they take.
The right hon. Gentleman also said that we were heading for a crisis. I believe that that was true between 1970 and 1974 and that this Government had to pick up the pieces in February 1974 which were left by the Conservative Government and try to resolve the problems that they had posed.
There is no doubt that the greatest achievement of the present Labour Government in the course of the past two years has been to have a dialogue with the trade union movement, which is a vital part of our economy. The Government have gone in for consultation instead of confrontation. But if we are to obtain the support of the great majority of the people—whether or not they are trade union members they are affected by what happens—it is necessary for the Government of the day to have the co-operation of the TUC. If we are to face the problems of inflation and those of the lower-paid worker, we need the support of the trade union movement and, as has been said by Opposition Members, we need the understanding and support of the CBI and of industry in general.
We all welcome the fact that, because of the way in which this Government have established this dialogue and liaison with the trade union movement, we have already seen in the past two years a dramatic change. In a Written Answer I received on 15th March from the now Secretary of State for Employment I was told that stoppages of work due to industrial disputes during the period of the Conservative Administration in 1972 resulted in almost 24 million day lost. Yet in 1975 under a Labour Government the figure was less than 6 million. This is because the Labour Government have taken the trade union movement to heart and have decided to act in concert with


it in order to look after the people as a whole.
I welcome the pension and benefit increases in the Budget. They are in line with the proposals put forward by the trade union movement, but we must be prepared to pay for them. We have to resort to measures to find the cash to meet our obligations—not only to the old, but to the sick, the unemployed and the disabled. The whole House will welcome the Chancellor's proposed increase in pension and social benefits.
I have a small point to make on the question of value added tax arising from reactions from my constituents. Electrical repairs could have been zero-rated. They put at risk old people and many others who might tamper with electrical equipment rather than taking it to a contractor.
The level of unemployment at the moment is unacceptably high. The economic blizzard of 1974 and 1975 was not of our making. It was a world-wide economic reccession. Nevertheless, we should take pride in the fact that the Government have spent money to assist job creation and to provide work. They want to reduce the rate of unemployment.
I only wish that the Chancellor could have found it in his heart to impose some kind of selective import controls. In the woollen industry in Yorkshire, particularly in my constituency of Huddersfield, we are concerned with the problems of the dumping of goods in this country at prices very much lower than they should be. I would have hoped for a more constructive attitude from the Chancellor about import controls. The country is emerging from the world depression and is beginning to see the upturn in the economy, but we have to face the facts of life. We have not been able to compete in world markets mainly because of a lack of investment in industry, but also because we have not sold our goods abroad in a forcible enough manner. But the terms of trade are beginning to turn in our favour and unemployment is falling, and there is hope for the future.
I turn to the offer made by the Chancellor in his Budget Statement. It is unique in my experience as a Member of this House for 12 years for the Chancellor

to say to an outside body "This is what I am prepared to give if you will give in return." The facts are simple. Because we were able to obtain links with the trade union movement last year, the £6 limit worked and was fair. That has enabled the Chancellor to be on target with his declared aim of reducing the rate of inflation to 10 per cent. by the end of this year.

Mr. Victor Goodhew: We are delighted to see the hon. Member back and we hope he will continue in good health, but we do not wish him to mislead the House. When he talks about links with the trade unions, consultation, and success on the wage limits he should remember the constant consultation carried out with the trade uions by my right hon. Friend the Member for Sidcup (Mr. Heath). He should bear in mind also that at that time counter-inflation measures of a similar type were imposed by the Conservative Government and opposed by the Labour Party. In contrast we are supporting the Government.

Mr. Lomas: I accept some of the hon. Member's points but he should remember that the right hon. Member for Sidcup (Mr. Heath) was responsible for the 1974 election because he decided on confrontation with the trade union movement. We have decided on consultation rather than confrontation.
The important thing is not the size of the wage packet but what the wage packet will buy. There is no point in giving a £10 or £20 a week increase if the increase is overtaken by inflation. That is why I hope that the trade union movement and all workers will try to understand what the Chancellor is attempting to do.
The Chancellor must, however, do something positive on prices and ensure that there is sufficient control over them. He should ensure, if possible, that the suggested increase in the price of school meals does not take place. We must try to look after one-parent families and the lower paid.
My union—the National Union of Public Employees—would prefer a flat-rate increase rather than a 3 per cent. increase and threshold agreement because it represents lower-paid workers. These people will benefit very little from the


Chancellor's proposals. Nevertheless, the Chancellor has, I believe, adopted a negotiating position before the Finance Bill becomes an Act. I believe that between now and the end of June these negotiations should take place. I hope that efforts will be made to persuade both sides to accept that the fact that they must agree on a reasonable norm that will ensure that we keep inflation down and, at the same time, that we do not let the lower-paid worker suffer as a consequence.
There is no doubt that the trade union movement must look at the proposals that have been made very carefully indeed. There is no soft option in the problems that face this country. There is no easy solution. It would be idle of the Labour Party, the Tory Party or the Liberal Party to pretend that it could come up with an instantaneous solution ao the problems. However, I believe that, given good will on both sides, we can ensure that the unions will back the Government in their efforts and that we shall obtain the support of the people, and that as a result of that and of the measures that we are taking to alleviate the suffering and hardships that are endured by many people, people will say that the present Labour Government have tried desperately hard to fulfil their obligations to those who are in need. I believe that the present Government will go on record as being successful in that attempt.

5.42 p.m.

Mr. Ralph Howell: Before starting my criticism of the Budget, I want to mention two items in it that I welcome. First, I welcome the cut in the 25 per cent. VAT rate, which will be of great benefit to the boat-builders in my constituency. Secondly, I welcome the cut in capital gains tax on agricultural land. Both of these measures will be very much welcomed. It is a pity that the cuts were not greater. It is a particular pity that the Chancellor did not see fit to return to the standard rate of VAT at 10 per cent. It would not have been a case of eating humble pie. The Chancellor would have endeared himself to the country if he had done that. It would have been a great help to all small traders. I hope that even at this late stage he will reconsider his decision.
This Budget is no answer to our problems. It will not be an answer to our problems if the 3 per cent. sticks or if it is agreed at a higher rate, or even if there is a nil increase in wages. The problem in Britain cannot be solved until we have recognised that most of our trouble is due to an absurd taxation and welfare system, which is completely uncoordinated and which is dragging the country down. Until some Chancellor, either Labour or Conservative, has the courage to alter the whole of our taxation and welfare system, Britain will continue to decline, and decline rapidly.
The present system is destroying incentive to work. We are over-taxed and over-governed to a tremendous extent. Somehow we must create conditions whereby it pays to work. Nearly half the population are either worse off or only marginally better off if they work than if they contract out and leave it to the State to take care of them. This must be changed.
I am particularly disappointed that the Chancellor did not see fit to cure the huge number of anomalies which have been caused by a small mistake made by the Attlee Government in 1949 which has developed into a vast mistake. In 1949 it would probably have amounted to a mistake of a few hundred thousand pounds. Now it has developed into a mistake of £500 million a year. The people of Britain who work regularly and pay their taxes year in and year out are wrongfully being taxed to provide tax rebates for those who work spasmodically. This has created a most absurd situation, in which, on last year's figures, in the first few weeks of unemployment people can be £14 a week better off out of work than in work. In some cases this can continue for 22 weeks a year. This must be altered.
It is in everyone's interests that we should make all income taxable. All income, whether from earnings or benefits, should be classified as income for taxation purposes. By so doing, a saving of £500 million a year could be made. If only the Chancellor had had the sense to do this and to use that £500 million to lift up the tax thresholds, he would have gone a long way to bring a bit of sense into our taxation system. It would not have done it all, but it would have helped considerably.
I want now to discuss tax thresholds generally. This is not a party matter. I welcome the support that I had from the Liberal Benches in the Liberals' debate a few weeks ago. The tax thresholds are absurd. In 1950 no one earning less than the national average wage was taxed. By last year the tax threshold had fallen steadily throughout Conservative and Labour Governments—and there is no difference in this respect—so that we were taxing people earning 48·8 per cent. of the national average wage. What a ridiculous state of affairs. Now, as a result of the Budget, if the agreed conditions apply, the threshold will have fallen to 47·9 per cent., and if those conditions do not apply, it will have fallen to 44 per cent.
Something must be done here, because whatever income tax is for, it certainly is not intended for taxing the lower-paid into increased poverty. That is exactly what it is doing.
Let me give a few figures to show what will happen under these proposals to a man with a wife and two children. If the conditions are not approved, the tax threshold will be £28·90, and if they are approved it will be £31·40. When the social security level for such a family is £35·85, what sense is there in taxing a man who is earning less than the poverty line level that we fix for social security? Surely this must be altered. I ask the Government to reconsider this matter. Although I want them to do much more in this matter than merely go up to social security levels, to tax people below the level of social security is totally absurd.
Even more absurd is the family income supplement level. Again, for a family of a man, wife and two children, the maximum level at which family income supplement can be received is £43·50, and this must be compared with a tax threshold of £28·90. The absurdity in this matter is that we actually pay people benefit and tax it at the same time, so that the benefit and the tax cancel out.
We must do something about this. It simply cannot continue. I believe that this is something that everyone on all sides of the House recognises. It is recognised in particular by Mr. Frank Field, the director of the Low Pay Unit

and the Child Poverty Action Group. I pay tribute to the work that he has done in the matter of trying to bring this to the attention of the Government and the country. We cannot go on acting in this totally idiotic way.
My next point concerns subsidy. We are borrowing an extra £12,000 million—that, I understand, is what is expected—yet, strangely enough, we are giving ourselves in subsidy £12,000 million. At least, that was so last year, though there it will probably be even more this year.
Thus, we are just about balancing our books apart from subsidy, and then we have the audacity to borrow from other nations £12,000 million and to hand it out to all and sundry in subsidies. We should all think on this matter very carefully, since everyone is the recipient of subsidy in one form or another.
A great deal has been said about how we should correct the system and cut Government expenditure. In my view, there is only one way by which we can cut Government expenditure, and that is by reducing the number of spenders. We are now employing 1,100,000 more people in local government than we were in 1960, and, if we take into account the extra number in the Civil Service as a whole, the total is 1,350,000 more-doing today what was being done by that number fewer in 1960 and, in my opinion, doing it much worse.
We must stop recruitment, and we must cut out unnecessary services. There is no other way. The truth is that we are taking people from the wealth creation sector and putting them into the wealth spending sector, leaving the many fewer wealth creators to carry an impossible load. That is what is causing so much of our trouble in over-government and over-taxation.
With specific reference to our level of taxation, I draw attention to what I was told in a Written Answer—col. 247 of Hansard—on 25th March. This demonstrates just what we are doing to ourselves. It is my opinion that we have the highest taxation in the world, certainly in the Western world, according to these figures. Our starting point for taxation is 35 per cent., and our highest rate is 83 per cent. In France the starting point is 5 per cent. and the maximum is 53·5 per cent. In Canada the starting


point is 6 per cent. and the maximum is 47 per cent. For Sweden the respective figures are 7 per cent. and 56 per cent. For the United States they are 14 per cent. and 50 per cent. For Germany they are 22 per cent. and 56 per cent.
Thus, our taxation is just about double the average of the rest of those countries taken together. Until we recognise that we must lower taxation, that we must allow people to spend their money in their own way and allow them opportunities to save, we shall never get out of our difficulties.
I reiterate the point with which I began, that until we scrap completely our taxation and welfare system and start again, we shall never get out of our difficulties, under any Government. I hope that my own Front Bench recognises that, too.

Mr. Molloy: I am following the hon. Gentleman's remarkably interesting argument, and I have a good deal of sympathy with some of what he says, but will he not agree that, if his right hon. and hon. Friends share his views on public spending, they ought in all honesty to be prepared to say where they consider the large cuts in public spending ought to come? They ought not just to refer to them as a whole and then hide behind the idea that they are opposed to public spending, without having the courage to say where the cuts ought to come.

Mr. Howell: I shall not be led too far down that path. In my view, the time has come for us to spell out in more detail what we should cut, and I have just tried to spell out some of it myself. First, we should cut the massive number of civil servants and local government personnel, which is growing at 150,000 every year—and every year, indeed, growing by a greater number than in the past. We must put a stop to that.
As I say, the answer is to scrap completely our present taxation and welfare system and start again. We should have a system under which all income is classified as income for tax purposes. We should then raise the tax thresholds to at least two-thirds of the national average wage in the first instance, and eventually to the national average wage. We should unify social security benefits so that there is one payment only, and that should be limited to a reasonable figure. At present,

an almost limitless amount can be paid in some cases.

Mr. Brian Sedgemore: Limitless?

Mr. Howell: We should, as I say, cut the numbers employed in local government and the Civil Service, and we could then as a result cut taxation generally.

Mr. Atkinson: What about those on the dole?

Mr. Howell: Also, we should make a dramatic and massive switch from direct taxation to indirect taxation. The sooner we recognise that by going to indirect taxation and allowing people to make their own decisions on how much they pay as a result of their purchases, the better it will be generally.
I believe there to be no other way out of our problems. Until we recognise the need for a real change of attitude and a real change of system, and act on that realisation, the country will continue to decline.

5.57 p.m.

Mr. Brian Sedgemore: I hope that when the hon. Member for Norfolk, North (Mr. Howell) next lectures us in the authentic voice of Conservatism he will not confuse income tax with total taxation. In fact, we are not the highest taxed country in the world. The figures have been spelled out. They can be found in Economic Trends and several other documents. We are less highly taxed than Sweden and Norway, almost certainly less highly taxed than Germany, and probably taxed similarly with France. The hon. Gentleman's figures were income tax figures, and it is therefore not quite honest to talk about taxation in those terms.

Mr. Ralph Howell: I was reading out the income tax figures, which can be seen in Hansard of 25th March.

Mr. Sedgemore: But the hon. Gentleman kept talking about total taxation, not about income tax, and that was the difficulty.
At a time of low output and high unemployment the Chancellor presents us with a neutral Budget and refuses to do anything about certain imports. This means that, for the future, effective demand, output and employment in this


country will be determined by forces wholly outside the Government's control. It means, in effect, that the Keynesian era is coming to an abrupt end, with a total abdication of responsibility by the Government over those sectors which most affect people's livelihoods and prosperity. It means also that certainly some of the forebodings of the London Business School, the National Institute of Economic and Social Research, Phillips and Drew and the Cambridge Economic Group will come true over the next few years. I say that not to be alarmist but simply because the reality is alarming.
One is bound to have mixed feelings when looking at the constituent parts which make up the Budget. My own view is that the social priorities are broadly right and that the trade and industrial policy behind the Budget is broadly wrong. Everyone is pleased that there is help for pensioners, but no one can be pleased at the prospect of economic growth by hunch, by guess and by God, and a taxation policy which virtually says that in perpetuity the corporate sector will not pay tax is hardly to be welcomed on this side of the House. Sandilands may be good for capitalism but it is certainly not good for Socialism.
Moreover, we have a pay policy which, in my view, is not wholly to be welcomed in so far as, stripped of all the mumbo jumbo and all the tables in the books, and taken in conjunction with the rest of the Budget, it means lower living standards for the bulk of working people. I suppose that one could say that the Prime Minister almost admitted that a couple of days ago. My right hon. Friend the Chancellor of the Exchequer has eschewed fine tuning many times in the House but he has presented a Budget which is nothing but fine tuning. He has made it clear that if there is so much as a hiccough in the savings ratio, or the build-up of stocks, or a deviation from the pay policy, he will come scuttling back to the House and give us yet more fine tuning. That suggests that he is speaking from a position of weakness rather than strength and that he does not believe in his own strategy.
Since I do not believe in the Budget we are at least what the lawyers would call ad idem in that. I give the Chancellor four marks out of 10 for his Budget.

Some of my hon. Friends might say that that is an excessively high mark, but one can be generous because there may not be another Budget from this Chancellor, and not much in the Budget is irreversible. We can, therefore, carry out the right policies if we persuade the Treasury mandarins to change their minds.
The central part of the Budget is the pay policy and I have several points to make about that. I do not know if the Archangel Michael is right to say that the pay policy is not corporatist, but a sin is worse when it is committed by an archangel. It certainly is not a Socialist policy. It is a bungled piece of mismanaged capitalism. From the moment it was announced the foreign exchange market inevitably shuddered and it has continued to shudder over the past four days. The Treasury must be kicking itself for cocking up the presentation of the Budget.
I do not like a pay policy which is likely to bring odium on the trade union movement. It is presented in such a way that if it is not accepted pensioners will feel bitter about price increases, and others who are not trade unionists will be confirmed in their dislike of the trade union movement. The media will label trade union leaders as bully boys who take away concessions from the women and kids. The odium for bad and wrong economic policies belongs to the Government and not the trade union movement.
The pay policy is unfair because we have heard nothing about limits on the pay policy, and particularly because of the tax relief for those on a taxable income of over £4,000. To be in that band one would have to have an income of over £6,000. It is absurd to call fair a policy which means that a married man with two children on £8,000 a year gets a greater tax concession than the same man earning between £2,000 and £3,000. I can understand the Chancellor of the Exchequer presenting the CBI with such a pay policy and claiming that it is fair, but I cannot understand how he can present it in that way to the trade union movement.
There is something of the conjuring trick in this pay policy. Tax concessions, which should have compensated for last


year's inflation, have been added to next year's wage bill. That is a double-counting fraud. The Budget does not provide for tax reductions on personal earnings but a real increase in taxation.
The Chancellor has spelt out only two parts of the pay policy—pay settlements and conditional tax concessions; but there are three sides to the policy. In addition to wage settlements and tax concessions there is the series of devaluations we have had since the end of February. A combination of those three things means a lower standard of living and a fall in real income in the coming year.
After the Budget I read The Guardian, which said the whole policy was equivalent to a real income rise of between 6·5 per cent. and 10·5 per cent. God save us from the economists on The Guardian. Those percentages have nothing to do with real income, but relate to the rise which is necessary to achieve the same standard of living if taken together with the tax concession proposal.
The 3 per cent. figure is interesting. If that is accepted there are likely to be declining labour costs. Opposition Members will have to invent a new theory for the causes in inflation in a situation where there would be negative labour costs. But negative labour costs in conjunction with productive economic growth, which the Chancellor spelt out, can only mean a substantial shift of resources from labour to capital.
It is legitimate to ask an hon. Member what his attitude is towards the incomes policy. My attitude does not necessarily square with that of all in the Tribune Group. I do not believe that free collective bargaining is the ark of the covenant. If the incomes policy were seen as part of a more interventionist industrial policy, if it were part of a policy linking planned, as opposed to unplanned, growth of imports to investment and the pricing policies of our major companies, and if it had a centrally-based Socialist concept of planning rather than a corporatist concept of planning I would support it. I would have supported a strategy involving an incomes policy which would allow for complete revalorisation of the tax system in line with inflation, bigger concessions on personal earnings, and wage settlements

at least three times as generous as those proposed.
I basically object to the strategy behind the Budget. We are in for trouble. The Treasury policies are calculated to create a series of currency wars within the next 12 months and to bring about European disintegration. Pro-Europeans should think carefully about that. The policies threaten the whole basis of the international payment system. Traditionally, Treasury mandarins have been regarded as high-minded and conservative, but we must realise that they are putting in jeopardy the future of the country and the future of a particular Government and political party.
The warnings are sounding loud and clear. There was a substantial devaluation at the beginning of March, a further devaluation 10 days before the Budget, and the devaluation since the Budget. The signs are that this will continue, that with the proposed policy there will be more devaluations, and that the Stock Exchange will become more jittery because the Chancellor of the Exchequer has put the economy into disequilibrium. The chances are that as the economy picks up imports will be sucked in and the balance of payments will turn sour and there will be further trouble on the foreign exchange market.
Working people will suffer, because they will be squeezed between what the IMF and our partners will allow and what the trade unions con bring back in wage settlements, thus permanently depressing living standards. I say two things about that. First, if the existing payments system does not work, change it. Secondly, rather than approach the problem of inflation through real wages, let us try to increase output in the fight against inflation. But that will not work unless we are prepared to plan foreign trade as a basis for planning the British economy.
I believe that my right hon. Friend the Chancellor was right when he said—and one of his colleagues quoted Mr. Terry Ward—that we have the capacity in this country, given the deep recession we are in, to grow by about 5 per cent. a year for the next five years; but we shall be able to achieve that growth only if we get round the balance of payments constraint. I do not believe that we shall be able to do that unless we can plan the


growth of imports over the next five years. If we are prepared to have import growth of 5 per cent. a year during the next five years, rather than a projected 10 per cent. a year, how can anyone on either side of the House call that a siege economy?
If we could work out a policy on those lines, which did not damage the interests of our European partners any more than it damaged our own, we might have much greater political and economic cooperation with Europe. It may be strange that those in the Tribune Group are now the only people who can, perhaps, bring about some serious European political integration.
I invite my right hon. Friend to introduce, as I dare say he will before the autumn is out, a licensing system for imports which seeks basically to hold them at their present level during the next 12 months, unless particular firms can argue that it would be in the interests of the economy to increase their imports. Next year, we should then see increases in imports of capital investment goods which we cannot produce very quickly. We should probably see increases in imports of steel, but should probably have to cut back projected imports of cars, textiles and certain other consumer durables. Thereafter, we could have a flexible licensing system, taking into account the interests not merely of this country but of some of our European partners.
In order to prevent retaliation, which desperately worries the Opposition, we could link the import licensing system with our planning agreement system, agreements on investment and the carrot or stick—whichever it is called—of controls on the prices of the goods and services of our major companies. If we were prepared to do that, no Conservative Member could complain that we were injecting vast sums of money into the economy and risking massive inflation through increasing the money supply. Effective demand would provide the sort of take-off we want. If the take-off were too slow we could reduce taxes, and if it were too fast we could increase them. We could get rid of the Budget with that sort of policy. For the next five years

it could be just minor tinkering and fine tuning.
We could concentrate on our basic industrial strategy, and if we were prepared to announce that that strategy would be effective for five years we could create the magic confidence which Conservative Members always talk about. We could give industry that five-year run and increase not only private investment but public investment. We could set about our planning by using the NEB and the planning agreements system, ensuring that firms would remain viable at the end of five years, and build up the whole ethos of the public sector.
I do not believe all the gloom in the Cambridge economic report, but I believe that the underlying basis of the report is true, and that the planned growth of imports is a better policy than currency wars. Wynne Godley, a former adviser to the Chancellor and presumably someone who is not out of his tiny Chinese mind, says:
Not only is unemployment in 1980 likely to be higher, and real take-home pay (for those who still have jobs) lower than today; but also give existing arrangements for managing the economy, there is no prospect of recovery in the longer term and there is no reason to suppose that underlying trends in international trade would improve. Existing arrangements are likely to produce a chronic deteriorating recession, probably combined with two-digit inflation…. Prosperity can only be achieved only by changing these arrangements.
I add one sentence. Prosperity can be achieved only by changing those arrangements and through a Socialist industrial strategy.

6.15 p.m.

Mr. David Hunt: In this, my maiden speech, in accordance with what I understand to be the conventions, I should like first to pay tribute to my predecessor, Lord Selwyn-Lloyd. In doing so, I am aware that many words have recently been spoken about his career as a distinguished Member of this House, as a statesman of considerable ability, and as Speaker.
My tribute is to my predecessor as a constituency Member. For 31 years he served our community in Wirral, and he had and still has a great reputation for a lifetime of service. His work in Wirral is well known, in particular in connection with cancer research, the provision of


homes for the elderly, the Abbeyfield Society, Shelter, his efforts to preserve Caldy Manor Hospital, and his work in many charitable organisations both inside and outside the constituency. We in Wirral praise and respect Lord Selwyn-Lloyd for his service not only to the country but to our community.
One great example which Lord Selwyn-Lloyd has set and which I shall find it very difficult to follow is that in the constituency he has a reputation of replying to all letters by return of post. When he was Speaker he received 7,000 letters in his first two years and still maintained his reputation.
The name "Wirral", as many eminent historians in the area have told me from their researches, dates back to the year 895, when it was first mentioned as Wirheal in the Anglo-Saxon Chronicle. It forms part of the peninsula between the River Dee and the River Mersey. On the Dee side are the villages of Hoylake, West Kirkby, Caldy and Heswall. On the same side, taking in part of Cheshire, are the villages of Parkgate, Neston, Burton and Willaston. The constituency also moves close to the Mersey on the other side, taking in a large part of Birkenhead, Upton and Prenton.
It is a large constituency, with more than 94,000 electors. On behalf of my constituents, I can say that we are concerned not only about our own conditions but very much about conditions in the whole of Merseyside. As one who was brought up in Liverpool and whose family is part of the Liverpool shipping heritage, I am very sad about the decline of industry in Merseyside. The present high level of unemployment there is a tragic waste of human resources.
In Wirral we suffer an unemployment rate of 10·3 per cent. In some parts of my constituency it is as high as 25 per cent., and in some industries it is even higher. I was told this morning by the National Federation of Building Trades Employers that in the construction industry within a 10-mile radius of Birkenhead and Liverpool there is 33·6 per cent. unemployment among operatives.
It is very worrying to contemplate the amount of social and economic damage done by such widespread unemployment. To be without the opportunity of work

is an affront to human dignity. Therefore, I welcome the Chancellor's extension of the job creation programme, which I support, although many representations from constituents lead me to suspect that not all the money is being spent on the provision of jobs. Some may be being wasted in meeting surplus administrative costs. As long as the money is spent to create jobs I praise the scheme.
It is youth unemployment that must have the concern of us all. For school leavers to move from the classroom to the dole is for them to understand, in accordance with the education that they have been given, that they have failed completely and utterly. We must do more to alleviate youth unemployment, but job creation can be only a temporary palliative. It is the far more serious long-term youth unemployment that we must tackle urgently. We must increase the facilities for training. We need a new skillcentre in Wirral. At the moment we do not have sufficient facilities. Training must be increased, but it must be relevant. In many ways the training that we are giving our youngsters does not prepare them sufficiently for the jobs that we all earnestly hope will be available for them in the years to come.
It is, however, for those who are socially and physically disabled that the present situation has the most serious consequences. Therefore, I welcome the Chancellor's decision to extend further the Community Industry Scheme. I supported the Scheme during the three years that I was Chairman of the British Youth Council. I believe that it is invaluable in the help that it gives to socially disadvantaged young people.
Even more serious is the prospect that is faced in Merseyside of substantial further increases in unemployment. Many of the industries on which we depend are facing difficulties. I believe that there is a vital need to preserve the Shotton Steel Works. If we were to lose that industry we should lose the benefit of its excellent industrial relations record. If the works are to be closed there will be extremely depressing consequences, including a desperate situation for the Birkenhead docks.
Cammell Laird also needs more Government support. Surely one of the strong


arguments for the Government to site the headquarters of the British Shipbuilders on Merseyside, if the present legislation succeeds, is the impressive record and tradition of our area in the industry. On Merseyside we need special and urgent help unless we are to slide further into increasing unemployment and depression.
I respect the traditions of the House, but I hope that on another occasion I shall have an opportunity to enter into more controversial matters. I am privileged to have become a Member of the House of Commons.
Some have described how they believe that the power of Parliament has diminished, but I do not share that view. The Government may seek to limit the power of the Executive, but it is in this place that we still have the opportunity to defend individual freedom. The individual needs protection of his rights more than ever before. I shall seek to play my part in safeguarding basic human freedoms, one of the most important of which I regard as the right to employment.

6.23 p.m.

Mr. George Rodgers: I congratulate the hon. Member for Wirral (Mr. Hunt). He made a most interesting and constructive maiden speech. I look forward to hearing him frequently in future. I was involved in the campaign to try to prevent him reaching this place, but his victory was overwhelming. I warmly congratulate him on a first-class contribution.
I am grateful to have an opportunity to speak on the Budget proposals. In one area they are unique, as they offer us propositions. Therefore, I take them as being subject to genuine consultation and possible variation. I hold no resentment that the trade union movement is to be directly involved in decision-making. As a constant advocate of worker participation I welcome the rather cautious recognition that the real wealth of the nation emerges from the efforts of those who are employed in industry.
It is absolutely right that those who develop our wealth should be concerned with the nature of its distribution. I should like to see the area of participation extended—extended even to Members of Parliament so that we may be

allowed to influence the course of events rather than merely commenting upon it.
One astonishing feature of the Budget is a recommendation that the long-cherished myth, that the contents of the Budget should be delivered, swallowed and digested, should be disposed of for ever. It may be that we shall soon recognise that this annual rigmarole is obsolete—a relic of more leisurely economic eras.
Despite my approval of the Budget's novel approach, I gravely doubt whether the options made available to trade union leaders will leave sufficient room for sensible and meaningful negotiations and manœuvre. I have long held the view that an incomes policy is an essential ingredient in our overall policy. However, the regulation of wages and salaries cannot be taken in isolation; there are many other factors in the mix that demand equal attention, not least a more vigorous control of prices and a wider distribution to the community of whatever resources are currently available.
It seems ludicrous that the man on the factory floor should be expected to accommodate a deal that asks him to approve a system under which those on substantial incomes in excess of £5,000 or £6,000 a year, and well above that, should benefit more from a formula than he does himself. A settlement of that nature would widen the gap between those who are poor and those who are prosperous.
The trade unionist is being asked to negotiate on behalf of those who, generally speaking, are not only non-contributors to trade union funds but are frequently actively opposed to the whole concept of organised labour. We must remember constantly that the prime purpose of a trade union is to protect and, wherever possible, enhance the living standards of its members. If the Trades Union Congress is prepared to participate in policy-making on behalf of the community generally, so as to advance that cause, we should welcome the gesture. But the movement must not be trapped by being lured into a position in which its members are placed at a disadvantage.
I have no doubt that the Government's programme will effectively combat inflation. It is recognised that inflation is one of the main problems facing the


nation, the others being unemployment and the lack of adequate investment in manufacturing industry. I list the problems separately because I fear that the assumption that by ridding the country of the curse of inflation we shall automatically cure unemployment is too prevalent a fallacy.
We are all aware that there have been periods of sustained unemployment when the problem of inflation has not existed. Those of us who remember the 1930s will recall that there was massive unemployment at a time when prices were dropping.
It is desperately important that we recognise that it is insufficient to leave these matters to those who have failed to respond to the incentives to invest that have been offered by this Government and previous Governments. To make funds available is merely to fly in the face of all previous experience.
If we are to achieve the desired result it will be necessary to direct investment. The sooner we face that position the sooner we shall be able to clamber out of the present economic quagmire. I accept that it is only by investment in industry that we shall create the wealth that is necessary to advance our social programme. However, I do not believe that the action to which I have referred will cure the misery of unemployment. Employment is a separate issue, which requires separate remedies.
All the evidence demonstrates that the greater the capital investment in manufacturing industry the smaller the subsequent labour force. Between 1964 and 1973 the gas, electricity and water industries increased output by 57·5 per cent. In the same period the number employed in those industries fell by 16·2 per cent. Engineering in the same spell improved output by 46·6 per cent., with 13·2 per cent. fewer workers. Coal, petroleum and chemicals stepped up production by a staggering 71·5 per cent., with an 8·5 per cent. smaller work force. In textiles output increased by 30 per cent. and the number of workers was reduced by 29 per cent. I have quoted only four examples, but the same process applies across the whole spectrum of industry.
Although it is true that some slack would be taken up in the event of an uplift in world trade, the broad process would inevitably continue to accelerate

in the coming years. I fear that those who believe that we can meet the problem of unemployment by the traditional method of absorbing workers in industry are living in a world that has long since vanished.
Let me add one more sombre statistic. Within nine years our working population—that is, the number of people between 16 and 65, excluding students—will increase by more than 1,600,000—in other words, by more than the total who are unemployed at present. Surely nobody can believe that we can absorb a number of that nature into manufacturing industry.
In face of this situation we should seriously re-examine our attitude towards public spending. In the coming years we must aim to improve and expand public transport and the hospital and social services. Perhaps, too, we should review our rather Victorian and puritanical attitude towards work itself, much of which is plain drudgery. We should be looking towards a shorter working week, a shorter working life-time, and greater opportunities for education and travel for all age groups.
Led by a Labour Government we should be prepared to apply these principles. I am confident that from our present difficulties we can provide a brighter future. I realise that those difficulties exist on a formidable scale. Some of our difficulties are small compared with those facing the Opposition. We now hear outraged cries from Conservative Members, because the attitude of the trade unions will affect financial policies that have previously been the prerogative of Parliament, yet when we look outside this Chamber we see the allies of the Tory Party, in the CBI and in the City, approving the Chancellor's ploy and praying that an understanding will soon be reached between the Treasury and the TUC. Those of us on the Government side of the Chamber might be accused of possessing a multitude of polices, but nothing of substance has been delivered in policy form from the Conservative ranks.
I conclude by reminding Treasury Ministers that inflation does not affect people in a consistent fashion. It is quite feasible that the overall rate of inflation will be curtailed, but separate groupings within the community will be


adversely affected. The soaring costs of gas, electricity and coal, as well as of public transport, hit those on low or average incomes much more than they hit the more prosperous. Similarly, the cut-back in food subsidies hits those on low incomes more because a greater proportion of such incomes must be spent on food. The Government have done remarkably well in stabilising mortgage interest rates. Indeed, for the first time in years the rates are beginning to fall. Unhappily, during the same period council house rents have increased considerably and at a much faster rate than was forecast by Government spokesmen. It was anticipated that the rate of increase in 1975–76 would be in the region of 60p per week, but the information that has become available recently indicates that many local authorities are imposing increases far in excess of that figure. I believe that a policy that is damaging to those in greatest need will not and does not deserve to succeed. I hope that my right hon. Friend the Chancellor will bear this aspect carefully in mind when he discusses these matters with the TUG.
I wish my right hon. Friend well in the talks and I trust that good will and common sense will prevail, so that those who represent the broad working population are not bound too rigidly by the restrictions implied in the formula originally conceived by the Chancellor of the Exchequer.

6.35 p.m.

Mr. Nigel Lawson: It falls to me from the Opposition Benches to perform the happy task of congratulating my hon. Friend the Member for Wirral (Mr. Hunt) on an outstandingly able maiden speech. [HON. MEMBERS: "Hear, hear."] He follows a man whom I have known personally for 15 years. Selwyn Lloyd will be a difficult man to follow, but my hon. Friend has made a good start. He spoke feelingly about unemployment, a matter which unites hon. Members on both sides of the House, although we have differing views about the best way in which to deal with the situation. We look forward to hearing my hon. Friend again at an early date.
This has been, as is customary with Budget debates, a wide-ranging discussion.

I wish to confine myself to what appear to be the three central themes running through it, that is to say, the miracle, the borrowing requirement, and the deal.
The projected economic miracle of 1976–79 represents the Chancellor's medium-term economic strategy in the context of which we are being asked to judge the Budget for the coming year. The public sector borrowing requirement, the resultant of the Budget and the public expenditure decisions which preceded it, represents the inflationary potential in the economy, which, as is agreed on all sides, must be rooted out before it overwhelms us. The proposed deal with the TUC is in political terms the counter-piece of this year's Budget.
Before discussing this unique triad of follies, let me give praise where praise is due. The new system of cash control of public expenditure set out in the Budget-day White Paper on "Cash Limits on Public Expenditure", coupled with the promised, much more effective and stricter monitoring of the Contingency Reserve, that modest conjuror's hat from which an immodest number of expensive rabbits are customarily extracted, together represent the most important attempt to regain control of public expenditure since the disastrous introduction of the PESC system several years ago. However, they do not go far enough, and there is not enough parliamentary accountability written into the proposals as they stand, nor can any system of improved Treasury control overcome a lack of political self-control. None the less, the new system represents an important step forward, on which the Chancellor is to be commended.
My regret is that there is little, if anything, else on which I find it possible to commend him. The arithmetic of the alleged imminent economic miracle was set out in the Fourth Report of the Expenditure Committee. On Thursday night a somewhat chastened Chief Secretary—and I do not think that he was chastened merely because he had been passed over in promotional terms—tried to maintain that the figures were purely illustrative. But they are very much more than that. That was made abundantly clear by the Chancellor during


the recent, but never-to-be forgotten, public expenditure debate when he said:
Of course, no Government can give a firm guarantee that these targets will be achieved But if they are not achieved, there will be less, not more, scope for public spending…. If we should fail, for any reason, to get that improvement, we shall have to cut public expenditure programmes further, rather than increase them."—[Official Report, 9th March 1976; Vol. 907, c. 256–64.]
It is hard to imagine anything more irresponsible than to have agreed, as the Chancellor has done, massive public expenditure programmes which, on his own admission, can be justified and paid for only on the assumption that our economy will perform in future in a wholly different way from anything we have known in the past. Nor indeed has the Chancellor given any indication of the mechanism by which this miraculous transformation of our economic performance in terms not only of growth but of export, investment and, above all, import propensity, is to be achieved.
His critics on his own Benches below the Gangway—and we heard one very articulate and interesting example in the recent speech of the hon. Member for Luton, West (Mr. Sedgemore)—maintain that the only hope is a siege economy, direction of investment and the full panoply of Socialism, red in tooth and claw—or ed anyway. The Opposition, or most of us, believe that success can be attained only by rolling back the suffocating frontiers of public expenditure, by reducing the burden of taxation, by allowing a massive regeneration of profits and, above all, by setting market forces free to work. Here are two intellectually coherent prescriptions. They are positive. Each is an intellectually coherent prescription for the economy.
The Chancellor rejects them both. What does he put in their place? He relies on an exhortation designed to produce a national change of heart, what might be termed, metaphorically, the Christian Barnard school of economic thought. Unfortunately it can be expected to enjoy about the same degree of lasting success.
As for the public sector borrowing requirement, the fact that the Chancellor has given up any attempt to cut back and is actually planning an increase from £10¾ billion last year to £12 billion this year is horrifying enough and fully

explains the further collapse in confidence in sterling which is the sombre backcloth to our debate this week. The true picture—and I did some homework over the weekend—is even worse. It looks to me very much as if the Treasury has, if I may use a phrase which has been used before in a different context, "cooked the books".
The borrowing requirement, after all, is made up of two items. First, and by far the larger, is the financial deficit of the public sector. The second is the basket of other financial transactions, not part of the financial deficit, but which still have to be financed by borrowing.
Table 7 of the Red Book, which I am glad to see the Financial Secretary is just about to look at, shows that this year the public sector financial deficit is scheduled to rise by very nearly 30 per cent., from under £8¼ billion to over £10½ billion. A financial deficit of this size might have been expected to imply a borrowing requirement of at least £13 billion. In fact the official forecast—surprise, surprise—turns out at £11·96 billion, very nearly, as my right hon. Friend the Member for Leeds, North-East (Sir K. Joseph) pointed out, within a stone's throw of the Chancellor's £12 billion limit which he set out in his letter to the Managing Director of the International Monetary Fund. This has been achieved, we see when we look into it, by forecasting a reduction of well over a billion pounds, or nearly half, in the second component of the borrowing requirement, the other financial transactions.
This component has, interestingly enough, been rising steadily ever since 1971. Moreover, on further inspection, it emerges that the great bulk of this unexpected reduction is to be contributed by two items in particular. The first of these is cash expenditure by Government on the purchase of company securities, which will, it is forecast, fall from £481 million last year to £125 million this year. Pleasing as it is to imagine the National Enterprise Board's wings clipped in this way and the Industry Act put back on the shelf, one is bound to feel a trifle sceptical.
One possible explanation may be that the Government's plans are in future that their share acquisitions, as is intended with the nationalisation proposals for the aircraft and shipbuilding industries


which are before the House, will be made entirely by an offer of Government securities. No cash will change hands—in which case they do not, funnily enough, enter into public accounts. This fact is itself a useful reminder that the size of the borrowing requirement seriously understates the likely increase in the national debt and the problems and burdens of managing that debt in a non-inflationary manner. All of this money for the nationalisation of the shipbuilding and aircraft industries and every form of nationalisation financed by issuing Government paper might amount to another £1 billion. That is not in the books.
The other category which is forecast to fall by a comparable amount is somewhat mysteriously listed in the Red Book as "Miscellaneous capital transactions (net)". The only further enlightenment which is provided, in a footnote, is that it "includes unidentified items". Quite how the Treasury sets about the metaphysical task of forecasting unidentified items I am not quite sure. Clearly, and hardly surprisingly, it is not very good at it. At the time of the last Budget this item "Miscellaneous capital transactions (net)" was forecast to yield a net revenue of £45 million. In the event it turned out to have involved a net expenditure of £619 million. Yet it is on this flimsy basis that this year's borrowing requirement has been, notionally at any rate, kept to within the £12 billion limit.
It is this huge borrowing requirement which represents the inflationary, money-creating potential in the system. It is like a huge weight of snow high up on the mountain, at present suspended there, but which at any time may descend like an avalanche and engulf us all in inflation.
Incidentally, before I go further, I hope that the Chancellor will directly answer the points I am making about the miscellaneous financial transactions. These are important questions for the confidence of sterling.
While it is correct that, whatever its true size—and we shall, no doubt, hear this again from the Chancellor, as we have heard it so many times—so long as the public sector borrowing requirement is financed by genuine borrowing and not by printing money inflation will not ensue, the point is that how it is financed

is to a terrifying extent outwith Government control. The Chancellor may genuinely intend—I am sure he does—irrespective of everything else, to borrow enough to pursue a non-inflationary money supply policy, but in practice that may mean pushing up interest rates to levels which, politically, the Government would find intolerable and unacceptable and which, even if they were accepted, would totally kill any hope of private investment long before any physical crowding out were to occur.
That is why I think it was the height of absurdity for the Secretary of State for Trade, much as I admire him in many ways, to argue the other night, in his last speech as Paymaster-General, in effect "We did it last year. We shall do it again." Last year was a year of recession, as my right hon. Friend the Member for Leeds, North-East pointed out. This year is a year of recovery. What was even worse was to hear the right hon. Gentleman adding that last year the trick was pulled off with falling interest rates and this year there is no reason why the same could not be done again. This is not merely nonsense; it also reveals that the Government have two dangerously conflicting monetary objectives.
Whatever else in monetary policy may be unclear, and I accept that much is unclear or obscure, one thing is absolutely clear. It is possible with some difficulty to control the money supply or interest rates, but what cannot be done is to control both. If there is any hope of avoiding hyper-inflation in future, the borrowing requirement must be cut dramatically now. For non-monetary reasons this must be done, I am sure my right hon. and hon. Friends would agree, by making immediate cuts in public expenditure rather than by putting up taxation still further.
I was surprised to hear the Chief Secretary try to argue on Thursday night that for technical reasons cuts could not be made this year, in 1976–77. It was precisely in 1976–77 that the cuts which the Chancellor announced in the last Budget were to fall. These were cuts, understandably, which covered capital and current expenditure on goods and services, as well as transfer payments. What the Chief Secretary was saying really boiled down to the fact that the longer we wait the harder it becomes and ultimately it


becomes impossible, because we cannot cut yesterday's expenditure. This is precisely the reason for not waiting, and for starting now. It has got to come. Meanwhile I would offer the Chancellor one guideline—make economies all round but concentrate the cuts on those areas where the private sector is best placed to fill the gap. Housing and industry are two obvious examples.
I confess I may have given the Chancellor too much credit, because I was forgetting that, having failed to get the borrowing requirement down, the Chancellor has evidently lost all interest in it. In a key sentence in his Budget Statement, which I believe will return to haunt him on many occasions in the future, he declared that
… I believe it is well worth accepting some increase in the PSBR in order to achieve a lower rate of inflation".—[Official Report, 6th April 1976; Vol. 890, c. 281.]
He says "PSBR". He cannot bring himself to use the phrase "public sector borrowing requirement". This is of some psychological interest, even if it is of little economic significance.
Everything once again is to be sacrificed on the altar of incomes policy, this time in the shape of the Chancellor's controversial deal with the TUC I do not want now to go into the interesting and knotty question of the constitutional implications of the proposal. I have no doubt myself, as time goes on, that the instinctive reaction of my right hon. Friend the Leader of the Opposition will be seen to have been the correct one. Instead, I would like to analyse the economic folly—I welcome the Chancellor to the Chamber at this late hour—amounting almost to lunacy of the proposed deal. It is a very rum deal, whichever way one looks at it.
The Chancellor says workers will be better off by accepting it, and then produces little sums to demonstrate it, which he does by treating all tax reliefs, not just the conditional reliefs, as if they were part of the bargain, and tops it up by claiming credit for a purely arbitrary reduction in inflation which he confidently says will occur as a result of his lower pay limit without explaining the mechanism.
I was interested when my right hon. Friend asked the Chancellor whether he

thought that the trade unions were the cause of inflation. We are still waiting for an answer from the Chancellor. At any rate, the Chief Secretary seems to be singing a different tune altogether. At the end of Thursday's debate he said that:
if the Government are successful in achieving the 3 per cent. pay limit, they will do more to increase the profitability of British industry in the coming year than any other measure in the Budget or in any Budget for years past."—[Official Report, 8th April 1976, Vol. 909, c. 766.]
Evidently, as the Chief Secretary sees it, it is profits which will do better as a result of this deal. Perhaps the two should get together and decide what it is. I am sure trade union leaders themselves asked for some explanation of this.
Of course it is desirable that there should be a lower round of wage increases. It is desirable—and here I go back to what my hon. Friend for the Wirral said—because it is the only way of bringing down unemployment. That is why we need a lower level of wage increases in the next round. The Chancellor himself accepted this point. He said that:
for a country in Britain's present economic situation, the number of people who have a job will depend directly on the level of pay received by those in work."—[Official Report, 6th April 1976; Vol. 909, c. 270–1.]
This is absolutely right, but to go ahead and use the further bribe that if unemployment falls for this reason, and if the economy expands that much further, he will then reduce taxation is not merely unnecessary; it is inflationary, economic nonsense.
It is worse than that because it undermines one lesson which the people of this country must learn again and again, and that is the fundamental relationship between the levels of taxation and the levels of public expenditure. For too long Chancellors, on both sides, have been inclined under tuition from the Treasury to make it appear as if there were no link between the two. By divorcing the two and by showing there can be a tax change wholly divorced from public expenditure changes the Chancellor is hindering that lesson from being brought home and taken in. It has to be taken in if there is to be any national awareness of the nature of our problem.
The trouble with the Treasury is its obsession with the short term and fine tuning, which is the only way in which, for a very short time, one can divorce the level of taxation and the level of public expenditure.
Again it is all very well when taxes are going down—in real terms they are going up, but at least in money terms they seem to be going down—to tell trade unions that it is take-home pay which matters and, therefore, they should claim less. But what happens when taxes go up as they may do when the Chancellor introduces his autumn Budget? The trade unions will say "We must claim more" because this is the logic of what the Chancellor is saying.
Another big error which the right hon. Gentleman has made is that this kind of deal inflates the importance of trade union leaders, irresponsible as well as responsible. When trade union leaders make some extravagant statement hostile to the Government about having nothing to do with the pay deal, the pound is in greater jeopardy. If the deal is agreed, and there is some breach of it, as, no doubt, there will be, the people outside will think the end of the world has come, that the economy is on the rocks, and again the pound will be worse. The Chancellor is giving a most extraordinary hostage to fortune by placing this kind of sovereignty in the hands of trade union leaders, the irresponsible and responsible alike. It seems incredible. Why on earth, when it is a very difficult job, make it even harder?
As my right hon. Friend the Member for Leeds, North East said, with an incomes policy, there is a price to be paid and it is a very big price. The Budget is only a few day old, and yet look at what we have heard already. We heard on Thursday from the Chief Secretary that he cannot cut subsidies as much as he would like to because the unions would not like it and it might jeopardise the deal. He could not do away with the Price Code or relax it as much as he would like because the unions would not wear it. He said he could not reduce the tax on higher incomes as much as he would like because the unions would not wear it and he had to get their agreement on the 3 per cent. Mr. Len

Murray has said that reflation must be part of the deal; he says food subsidies have to be part of the deal. Yesterday Mr. Jack Jones was saying import controls have to be part of the deal as well as the direction of investment.
The trouble is that whatever benefits an incomes policy may bring the price is always too high, and it usually undermines the very economic policy it is intended to buttress—in this case the anti-inflation policy. It also has the great psychological drawback of creating and perpetuating the obsession with relativities which sours the entire political and social climate of this county and is one of the curses of our time.
It is true that it may also bring the political advantage for the Chancellor of providing a scapegoat. Some of the trade union leaders are a little afraid of this and, indeed, some of them are responsible for many of our national difficulties. But it is very odd for the party whose watchword, so we were told, was co-operation not confrontation, to prepare the ground for this sort of political scapegoating.
There is only one way in which confrontation can be avoided, or at least the likelihood of it reduced, and that is for the Government to stick to their own last. By getting close to the trade unions, they are making confrontation more likely What is the difference between a bribe and a threat? There is no difference between saying "If you are good, I will lower taxes" and "If you are not good, I will raise them". It is the same thing. Threatening is not the best posture to adopt to avoid a confrontation. But is it even worth it? Even if he establishes this convenient political scapegoat for his own errors, when the right hon. Member for Grimsby (Mr. Crosland) plays Jenkins to his Callaghan after the disaster has struck, I do not know whether it will come in handy.
Much as I should like to see taxes lowered this year for my own benefit, the only way in which confidence can be restored is for the Chancellor of the Exchequer to say "The trade unions are asking too much and, therefore, very sadly, I must say that the deal is off". He will not say that, but if he does I shall support him. In that way, and in no other, can he regain confidence.
The Chancellor of the Exchequer opened his Budget Statement by saying:
The Budget I am presenting today is likely to prove the most crucial of the present Parliament."—[Official Report, 6th April 1976; Vol. 909, c. 232.]
Indeed it is, for it represents the act of abdication which spells the death knell of the Government.

Several Hon. Members: Several Hon. Members rose—

Mr. Deputy Speaker (Sir Myer Galpern): Order. I remind the House that, unless succeeding speeches are briefer, at least half the number of hon. Members who wish to take part in the debate will not be called.

7.1 p.m.

Mr. Les Huckfield: I, too, congratulate the hon. Member for Wirral (Mr. Hunt) because, although I did not hear the whole of it, the part of his speech that I did hear was illuminating, and showed great concern for the problems of his constituents. I am sure that hon. Members on both sides of the House will welcome many more of his contributions to our debates.
The hon. Member for Blaby (Mr. Lawson) was right in one respect, because he said that there was a fundamental difference between the philosophies espoused by him and by my hon. Friend the Member for Luton, West (Mr. Sedgemore). Unfortunately, the empirical evidence is not on the hon. Gentleman's side. When the Conservative Government last tried out policies of that kind there was a shift of resources to the private sector. The trouble was that those policies did not produce the results that the hon. Gentleman has listed. They gave much momentum to the building of office blocks, property speculation, and the like. The increase in investment in manufacturing capacity which the hon. Gentleman and I agree our economy needs did not take place. The track record of the hon. Gentleman's party does not support what he has said.
The judgment made by my right hon. Friend the Chancellor of the Exchequer in his Budget was just about right. His neutral tone, which was neither reflationary nor deflationary, was more or less on the right lines. I welcome the doubling of the temporary employment subsidy.

I welcome the increase in old-age pensions and the increase to be given to widows. I am intrigued by my right hon. Friend's offer of a carrot to the trade union movement. It looks very much like a carrot with a hard end, but it is a proposal worthy of serious consideration by the trade union movement, the House and the country. However, I doubt—this is where I have some criticism of my right hon. Friend—whether the transfer of resources to the private sector will produce the result that he estimates and which I think the economy demands.
I was a member of the Tribune Group that first accepted the £6 wage limitation and the White Paper on public expenditure limitation. I believed that the £6 agreement with the trade union movement, and the White Paper, were essential preconditions to growth. Working people are prepared to make sacrifices provided they see something coming out of them. They will be prepared to make sacrifices if it can be demonstrated to them that they will be made by the whole country and that they are fair. It is on the fairness of his proposals, apart from their results, that my right hon. Friend will be judged.
Unfortunately, the success of the £6 policy has already been overtaken by the fact that many of our continental competitors have been able to reduce their inflation rates to less than half of the rate current in this country. That is a pity, because the £6 policy has been successful in keeping unemployment slightly lower than it would otherwise have been and in maintaining confidence in this country and in its currency at a higher level than would otherwise have been the case. The trouble is that its success has been obscured by the even greater success of many of our major competitors in reducing their inflation rates.
There is a growing consensus in this country, in the trade union movement and in the Labour Party, that without economic growth we cannot have increased public expenditure and a return to completely free collective bargaining. As long as we have minus rates of economic growth and a diminishing manufacturing base, we cannot carry on with 60 per cent. of the gross national product going to the public sector. We cannot resume completely free collective bargaining in those circumstances. It


would be desirable to achieve an even bigger transfer of resources to manufacturing capacity—I should be prepared to see that transfer made from some of the social projects cherished by the Labour Party—provided it takes place in the public sector. If we wish to maintain our manufacturing capacity, we shall have to choose increasingly between the building of schools and hospitals and the building of factories. That choice is increasingly staring us in the face.
It is clear from many of the speeches made by the general secretaries of trade unions in the past two or three weeks that they, too, share the sense of realism about the need to regenerate manufacturing capacity. They have shown that manufacturing industry and economic growth must have priority. I say to my hon. Friends and to Opposition Members who have tried to give them advice that we should leave the trade union leaders to do the bargaining. Trade union general secretaries and members of the TUC have spent their working lives bargaining on behalf of their members and we should leave them to do the negotiating with the Chancellor of the Exchequer. They know what their members want and what their members will accept. It is essential that they and their members accept the bargain. The silly talk of some Conservative Members about the proposals of the Chancellor of the Exchequer being unconstitutional is far less relevant than the argument that my right hon. Friend's undertaking must be successful.
Perhaps the issue to which we should be turning our attention is whether we should allow the expansion of the economy to be determined by extraneous forces. Ought we to allow growth in the British economy to be determined by the expansion in the West German and American economies? That is basically the policy that the Chancellor of the Exchequer has chosen to pursue.
I do not believe that an even more generous reflation than my right hon. Friend proposes would enable an increase in employment of the magnitude that some of my hon. Friends have been proposing. I do not believe that a faster general reflation would automatically mean more jobs. We are now approaching the situation in which many manufacturers

have rationalised their production and manning techniques, and because many are operating well below capacity it would be possible for them to increase output by as much as 50 per cent. without taking on additional labour.
I do not accept the import controls advocated by some of my hon. Friends as a universal panacea. This retreat into a fortress Great Britain, complete with moat and drawbridge, surrounding ourselves with import controls, living off our fat and liquidating our overseas portfolio of longer-term investments, is a recipe for complacency and even further industrial decline.
When the Cambridge group of economists advocated import controls it was not as a panacea for all our problems but as a specific answer to a specific problem. They thought the British economy was not capable of the 5½ per cent. growth and the 14 per cent. import increase which they thought would be necessary to accompany that, because we could not get the percentage export increase to support that percentage import increase.
Those economists put forward import controls in a specific and not a universal way. However, I am glad that the Chancellor of the Exchequer has kept his options open, because in some cases, including television tubes and certain parts of the textile manufacturing industry, there may be a need for short-term import controls. I am conscious of the fact that there may be retaliation and that some of our traditional trading arrangements may be upset. That is why I regard import controls only as a short-term expedient that is necessary in some cases.
Let us suppose that we were successful in bringing about a significant reduction in imports through controls. I am not sure whether all his calculations are correct, but Mr. Sam Brittan, in the Financial Times, has worked it out that because of increases in competitive goods in this country an import reduction of £4 billion could mean the equivalent of an increase in income tax of 10p on the standard rate or in combined income tax and national insurance contributions of well over 50 per cent. It is not true that import controls are painless. Some of my hon. Friends seem to think that


the controls can be imposed without any loss of real income or without hardship to working people.
Despite the fact that we have had a depreciation of the pound of more than 35 per cent. since the Smithsonian Agreement in 1971, manufactured and semi-manufactured goods to the value of £13 billion are coming into this country every year. Trying to stem that kind of import flow would be bound to involve a cut in real income for some people and there would have to be a cut in the real incomes of working people.
No adjustments to our terms of trade and balance of payments—whether depreciation of sterling, deliberate devaluation or import controls—can be entirely painless.
I do not believe that most of British manufacturing industry's problems would be solved by import controls, because most of those problems are structural. These are the kind of problems outlined by the CPRS Report on the car industry and the Boston consultancy report on the motor cycle industry. They are the kind of problems that will have to be rectified, in no small measure, by the nationalisation of the aircraft and shipbuilding industries. We have an industrial sector with largely structural problems, with large sectors of traditional industries weighed down by outdated and outmoded production techniques. This would not be helped by import controls.
We have to move forward by much more specific and selective intervention in these industries. What worries me about the Budget is that my right hon. Friend is still relying on the private sector to bring about structural reforms.
We now have a situation in which concessions for stock appreciation have already cost the country £2 billion in the past year. Despite generous concessions to the private sector, the investment response has not been forthcoming. When I see that very sluggish investment response I am reminded that since the war we have tried all kinds of investment sticks and carrots and virtually every device tried in any other country, but we have still not got the investment response.
In his general strategy, in the White Paper on Public Expenditure and in his approach in the Budget, the Chancellor is right to try to get an even bigger shift

of resources into manufacturing industries. Until we get economic growth and an increased percentage of GNP into investment, we shall not be able to carry out many of the cherished projects to which the Labour Party is committed. Until we get that growth I shall be very concerned, because of the response that the private sector has shown in the past—and its track record diminishes with each trades cycle. The Chancellor may be relying on a private sector response that will not come.
We needed more selective intervention and more structural reform. I hope that the Chancellor of the Exchequer will turn increasingly to these kinds of policies in the future.

7.18 p.m.

Mr. Maurice Macmillan: I join in the congratulations to my hon. Friend the Member for Wirral (Mr. Hunt) on his notable maiden speech. I am sure that the whole House will look forward to hearing him again when he can give greater freedom to his known talent for controversy. I am glad that my hon. Friend ended on a note of defending individual liberty. This is one of the concerns that haunt so many of us and is of overriding importance in our society.
I want to be as brief as possible, and I shall therefore try to deal with only one aspect of the Chancellor of the Exchequer's proposals—the nature of the wage and tax deal that he is trying to make with the trade union movement.
Not for the first time, I agreed with much of what was said by the hon. Member for Luton, West (Mr. Sedgemore), and share his view that the deal is ingenious, but not quite fair, nor altogether real. I am pretty certain that the mirror was there to do the trick, though one cannot quite see it.
I am not quite sure of the constitutional implications of the Chancellor of the Exchequer's proposed deal. Many of my hon. Friends have referred to this aspect, but this is not the first time that this type of consultation has been initiated. The tripartite consultations started by my right hon. Friend the Member for Sidcup (Mr. Heath), when he was Prime Minister, were different in kind and timing but essentially the same in purpose.
In the first election that I contested, in 1945, I suggested that the industrial future of the country lay in closer consultation between management, strong trade unions and the Government. As long ago as 1929, Sir Winston Churchill first suggested a "Council of Industry". There is nothing basically new in the concept, but I am concerned whether, in the form in which it is put forward now, it is likely to be effective, and what economic and political dangers are likely to arise.
The Chancellor's proposals show that we are moving towards a corporate State by force of circumstances. It is a movement that is unacknowledged, to some extent unknown and certainly unmeasured. That makes it likely to produce the maximum problems and achieve the minimum effectiveness. The whole tenor of the Government's policy is collectivist rather than individualist. Some Labour Members below the Gangway would like to see it even more collectivist, but they imply a certain economic nationalism. I entirely agree with the hon. Member for Nuneaton (Mr. Huckfield) that to go for import controls generally—a form of protectionism—would provide a soft option for uncompetitive British industry. But I would not altogether rule out the value of specific controls for specific purposes.
The system put forward by the Chancellor clearly prefers order to the market place—an ordered economy rather than an economy responding to the needs of the market. We live in an international market and we must respond to it. The tendency to go towards an ordered rather than a market system, regardless of efficiency and questions of responsibility, has led to increasing nationalisation, an increasing desire to put money into the private sector through the National Enterprise Board, and devices such as planning agreements. That is corporatism.
When I listened to the Secretary of State for Industry recently speaking on these lines about the Government's policy as it affects industry, I felt I should perhaps substitute "Fascist" for "Socialist" when he referred to "Socialist industry". I use both terms in a technical and not a pejorative sense. The Leader of the House spoke of The Times leaders in 1927 and castigated their approval of

the corporate State in its then manifestation in Italy. I am tempted to remind him that Mussolini was once a Socialist journalist.
The great weakness of this corporate system, and going for order rather than market, is that it does nothing to create new capital. It results in a larger and larger public sector and greater public intrusion into the private sector, with no new capital formation, and without any real sense of urgency or innovation on the part of those who carry out these policies.
In this planned corporate effort there is a need to control investment. All Governments have shown that it is almost impossible successfully to control investment in nationalised industries in the sense of controlling their price structure and investment policies in such a way as to produce an economic activity that does not require to be subsidised. I believe that it is useless to attempt to control the investment of the private sector. The hon. Member for Nuneaton said that a great many incentives had been given to investment by successive Governments without much effect. I do not believe that that is true. Successive Governments have tried to help people with finance for new investment, but that is not what is required. The hon. Member for Nuneaton referred to the report on the motor car industry, which showed that it was not lack of new equipment that was making the industry unproductive compared with its competitors abroad, but the failure of our management and work people to use comparable equipment to produce the same amount of goods to the same standard. There is little incentive for anyone to invest in new machinery if manning scales are not reduced as a result. That is one of the major problems that has affected all industry since the war.
There has been a considerable misconception by successive Governments as to what is required. What is needed as a true incentive to invest is a profit. Companies need to be assured of a continuing gross profit before tax, and a taxation system that allows them enough net profit for proper re-investment. For individuals what is needed is to remove the present disincentive to investors inherent in our tax structure. That is specially true—and here I declare an interest—of the unquoted sector.
All the debates to which I have listened have been based on the assumption that new investment and the transfer of resources to the private sector have to go to massive and large-scale industries. I remind the House that about 40 per cent. of the GDP comes from firms which employ 500 people or fewer, and that about half the total employment in the private sector is in unquoted companies. If that is not taken into account in providing investment incentives it will be worth no one's while to invest in these firms. That misconception is shown in the balance of the CBI and in the composition of the National Economic Development Corporation. It would be better if more of these genuine entrepreneurs were represented on those bodies.
The Government are following corporate State policies which seek an economic end rather than trying to use economic means to allow individual citizens to pursue their own ends. They are seeking to go for efficiency at the expense of liberty, and that is disliked by both sides of industry. It cuts right across the unions' belief—shared by most managements—in free collective bargaining as the most efficient system of deciding wage levels.
The Chancellor has made a grave tactical error in presenting his package to a bargaining and negotiating body such as the TUC by making it appear so little negotiable at 3 per cent. Had he started by saying 7½ per cent. and suggesting 3 per cent. in wages and the rest in tax cuts, that would be a different matter. He has been a little unwise, both in suggesting that there is a great deal to give way on the 3 per cent. and in not making plain to all concerned that the total he is offering is 7½ per cent.
The Chancellor is taking an enormous risk in the circumstances of the day. The Government's policies have eroded capital formation, discouraged innovation and provided no incentive for investment. There is no attempt in the Budget to encourage the creation of new wealth. Most speeches we have heard from Labour Members have concentrated on a more equal division of a diminishing stock of wealth, whereas what we need is the creation of new wealth.
The Chancellor is taking this risk in circumstances in which public expenditure

programmes are at a level at which they are bound to compete for resources when there is an expansion of productive industry; his figures are more appropriate to a sales brochure than a serious Treasury document. Public expenditure itself is becoming increasingly concentrated on non-productive things.
We have a very shaky pound. We have a public service borrowing requirement that I doubt he will be able to finance, when real investment in industry increases without either an inflationary increase in the money supply or an increase in interest rates to a level that would endanger investment itself. We have the pound at risk by the permanent temperature-taking involved in the public negotiations for the Chancellor's package with the trade unions.
We end with two possibilities. Either we enter into a near siege economy voluntarily because we are determined to move through it into prosperity; or we are forced into a real siege economy, with imposed deflation leading to poverty and an enforced borrowing abroad with strings attached which we shall all find unattractive.
We all know what has to be done. Resources have to be moved into the private sector, and primarily into exporting. This Budget will not do very much to accomplish that. We must hope for the best, but we had better be prepared for the worst. Obviously we must try to bring home to people that we have been living in a sort of dream world. Perhaps that is more apparent to those who have recently returned from abroad. Having listened to the debate over the last few days, I have begun to wonder whether we, too, are not living in such a dream world, because it seems to me that we are approaching potential disaster with the foolish complacency of the lemmings, who rush over a cliff—but we do not have the biological necessity that drives them to do it.
We in this House must really tell the truth about the action that may be necessary. We have to stop nationalisation and stop supporting dud industries; we have to stop subsidising uneconomic jobs. We may need to take direct emergency action, such as cutting down price subsidies and perhaps increasing consumer taxation. We may have to consider selective import controls, and even rationing.
We have to say that we are prepared to do such things if we are to give people the hope that we have a programme for recovery. It will involve the closest possible consultation with the trade unions and with private industry, including the smaller businesses and the self-employed, who are all concerned, because any programme for recovery based on the need for emergency action has to be acceptable to those who work and live in this country. If we go for a soft option, the country will blame us most severely.
I hope that we shall vote against this Budget by voting against the first Resolution. I hope that we can do a great deal more. I hope that we—I mean not just the Tory Party but the House as a whole—can show the country that we are prepared to tell it the truth. To say how rough it may get, but that we have full confidence in the ability of the British people. This will not be a decision for any outside body, or, indeed, for any Government or Opposition. In the end, it will depend upon what is said and done and voted in this House.

7.35 p.m.

Mr. Douglas Crawford: As a parliamentary veteran of two years' standing, I associate the Scottish National Party in congratulations to the hon. Member for Wirral (Mr. Hunt) on his maiden speech.
This has been a "phoney" debate about what is largely a "phoney" Budget. The Budget is a compound of an inordinate amount of "ifs" and "buts". The debate has tended to concentrate on the "ifs" and "buts" and not on the main issues in the countries comprising the United Kingdom. It contains very little proper macro-economics.

Mr. John Nott: I have been present for the four days of this debate. I think that the hon. Gentleman has hardly been here. It is an insult to the House of Commons for someone who has not participated in our debates to say that they have been "phoney".

Mr. Dalyell: The hon. Member for Perth and East Perthshire (Mr. Crawford) is a "phoney" himself.

Mr. Crawford: The hon. Members for St. Ives (Mr. Nott) and for West Lothian (Mr. Dalyell) do not know the reason I

was not here on Thursday. I suffered a bereavement—that was my reason.
I shall not offer criticisms about the Budget as it affects England. Mr. Micawber said:
Annual income twenty pounds, annual expenditure nineteen nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
The Chancellor may be given some credit for a little tinkering with England and at last admitting that England is living beyond her means. Having read "David Copperfield", he should re-read Adam Smith. I reserve my muted plaudits that I have for the Budget to the effects it has on England. But I am not here to speak for England. I am here to speak for Scotland. England is not the United Kingdom and the United Kingdom is not England. The Budget is not good enough or relevant enough for Scotland, which continues to get a raw deal from the Union of 1707. The sooner that Union of Parliaments is dissolved, the better.

Mr. Dalyell: Rubbish.

Mr. Crawford: I am interested that the hon. Gentleman is shouting from a sedentary position. I shall explode one or two myths about what his party says about the Scottish economy. First, Ministers say that wage rates in Scotland are at almost the same level as in England. That is an irrelevant comparison. The relevant comparison is between the net family income in Scotland and the net family income in England, and the latter is considerably larger than the former.
Secondly, we are told that Scotland is benefiting from the Union—that for every £100 per head of Government money spent in England, Scotland is getting £120. We are told that we are getting more than our fair share of identifiable public expenditure. It depends on what one means by "identifiable public expenditure". Ministers conveniently miss out of these calculations that only 40 per cent. of Government expenditure is technically classed as identifiable. Defence, for example, is not classed as identifiable public expenditure. Scotland gets a minuscule amount of Government spending on defence.

Mr. Dalyell: It is not true.

Mr. Crawford: I am sorry that the hon. Gentleman is obviously feeling


rather ill just now. In general, there is a difference between public spending on Scotland and public spending on Scotland's behalf. Far from Scotland getting £120 per head as a share of Government public expenditure compared with England, the figure is nearer £105. But even that is not relevant. The touchstone for Scotland is not the comparison with England but the comparison with other small European countries. The whole suggestion that Scotland should have to prove the viability of her economy in the context of self-government is absurd.
I remind the hon. Member for West Lothian that a recent Scottish Council Report said that Scotland exported 14 per cent. more per worker in manufacturing industry than the United Kingdom average. The Edinburgh Junior Chamber of Commerce in a document "Ha'e we meat?" recently said that the output of the Scottish farm worker was 60 per cent. more than that of the English farm worker. Scotland can feed herself.

Mr. Dalyell: What evidence is there to suggest that the output of our farm workers is 60 per cent. above that of the English farm workers? What is the evidence to substantiate these allegations?

Mr. Crawford: I have more faith in the economic ability of the Scottish Council and Edinburgh Junior Chamber of Commerce than I have in the hon. Gentleman's economic ability.

Mr. Dalyell: That is not evidence.

Mr. Crawford: Myth No. 3 is the unemployment myth—

Mr. Dalyell: The hon. Gentleman is talking drivel.

Mrs. Winifred Ewing: So are you.

Mr. Crawford: We are told that unemployment is as serious in the English regions as it is in Scotland. But one should either compare a nation with a nation or a region with a region: one cannot compare a region with a nation or vice-versa.

Mr. Dalyell: Why do we have to put up with this?

Mr. Deputy Speaker (Mr. Bryant Godman Irvine): Order. I think that the

hon. Member for West Lothian (Mr. Dalyell) should contain himself.

Mr. Crawford: It is false logic to say that Scotland is benefiting because one or two English regions are worse off when it comes to unemployment. On a regional basis, within Scotland, four regions—Dumfries and Galloway, Highlands, Strathclyde and Western Isles—have unemployment as high as or higher than the worst-affected English regions.
But the real touchstone should be a comparison not with England but with other small European countries. The Scottish people have been brainwashed for decade after decade into thinking that their country's economic performance should be measured against the touchstone of England.

Mr. Dalyell: Will the hon. Gentleman give way?

Mr. Crawford: No, I must finish this speech.

Mr. Dalyell: Who has done the brainwashing?

Mrs. Winifred Ewing: You are out of order. Behave yourself.

Mr. Crawford: We have been brainwashed into thinking that our country's performance should be measured against that of England—

Mr. Dalyell: Who brainwashed us?

Mr. Crawford: If the hon. Gentleman catches your eye, Mr. Deputy Speaker, perhaps he can make his point.

Mr. Dalyell: I certainly will.

Mrs. Winifred Ewing: On a point of order, Mr. Deputy Speaker. Is it in order for the hon. Member for West Lothian (Mr. Dalyell) to speak from a sitting position so repeatedly after having been rebuked from the Chair?

Mr. Deputy Speaker: I have drawn the attention of the hon. Member to that matter and I am sure that he will obey the rules of the House.

Mr. Dalyell: Further to the point of order, Mr. Deputy Speaker. Is "brainwashed" a parliamentary term?

Mr. Deputy Speaker: As far as I know, there is no objection to the word "brainwashed".

Mr. Crawford: Perhaps the trouble is that there are not too many brains in one or two political parties in Scotland.
This slavish following of the theories of an economy which is centrally managed will not do. It is not good enough. It is economically illogical and illiterate. Its effect on life in Scotland—not only industrial but social and cultural life—has been demonstrated and it must stop.
My party is concerned about two Resolutions on which we may be voting tonight. The first is Resolution No. 2, affecting whisky, which will have serious effects on employment in the industry. To raise duty once again—if it is successful, the duty on a bottle of whisky will have risen by £1 in the last 13 months—is bad enough. I should have thought that the £380 million or so, at 1975 figures, which the Exchequer gets in duty was sufficient.
Perhaps more important than what is in the Resolution is what is not—that is, any help to the whisky companies to allow them to pay duty when the whisky-is sold and not when it comes out of bond. My hon. Friend the Member for Banff (Mr. Watt) went into this matter in great detail and with great perception in an Adjournment debate a month or two ago but got no assurances from the Minister who replied.
We are also concerned about Resolution No. 6, affecting hydrocarbon oil. The increase in the rate of duty proposed is totally unacceptable. It is a pretty irony that, just as oil is beginning to flow from the Scottish sector of the North Sea—as defined in the Continental Shelf (Jurisdiction) Order of this House—some of its prime potential beneficiaries should be deprived of its benefits in practice. Something similar could be happening to Scottish oil as has been happening for years to Scotch whisky—in other words, tax on a Scottish product is being used to finance schemes that a London-based Government propose. All this will have serious implications for those in rural areas. I am sorry that the hon. Member for West Lothian does not particularly care about those people.
Resolution No. 10, reducing the top rate of VAT, is to be welcomed, but there is still a problem with multi-rate VAT. Small traders have to spend many

hours preparing their returns. Whatever the rationale behind multi-rate VAT. perhaps the burden on the small trader could be lessened if the threshold at which VAT is paid in terms of the size of business could be raised from its present level of £5,000 to £15,000. I have been told in a Parliamentary Reply that the cost would be £75 million. Thtat is not a large price to pay. It would be more than made up by the creative and entrepreneurial energies released among those small traders.
It is a pity that the levy on the self-employed has not been abolished. I know that this was proposed by the Conservative Government in the 1973 Finance Act, but it is a pity that a Labour Government have not only not seen fit to abolish it but have actually raised it. I understand from another reply that the cost of abolishing that would be £68 million—

Mr. Dalyell: Tell us what it would cost.

Mrs. Winifred Ewing: He is at it again.

Mr. Crawford: I just did—I said, £68 million.
To achieve prosperity in Scotland, this House, this Treasury and those who were described in the House at Question Time today as the "long-haired Oxbridge economic advisers"—

Mr. Norman Buchan: You are Oxbridge yourself.

Mr. Crawford: And I am proud of it—but I do not have long hair.
The United Kingdom economy cannot be looked after by central economic demand management. I agree that there might be a tendency for the £Scots, if unchecked, to be revalued too quickly and that that would lead to many problems. But there is no doubt that the £Scots would be one of the healthiest currencies in Europe and no one can doubt that the problems created by a strong currency are far preferable to those brought about by a weak currency.
I was amazed by the statement of the Paymaster-General in the constituency of the hon. Member for West Lothian that, if a Scots pound were revalued, industry


would have great difficulty with exporting—

Mr. Dalyell: You say the same.

Mr. Crawford: I suppose that we should all write to the President of France to congratulate him on the franc having been devalued.

Mr. Buchan: Mr. Buchan rose—

Mrs. Winifred Ewing: Do not give way. He has only just come in.

Mr. Crawford: Until we have self-government in Scotland, Scotland will be the prey of tinkering, fiddling Budgets like this, which continue to give us medicine for illnesses we do not have It has been said that the English economy is in a free fall and it is important for Scotland not to be affected. The Budget is irrelevant for Scotland. It will mean a cut in living standards, which are already low enough. Perhaps the hon. Member for West Lothian is happy about that.
A Westminster-prepared Budget is a damaging irrelevancy for Scotland. The political exemplification in Westminster of these theories of central economic demand management, elevated to a religious level and defended by its protagonists, in England and Scotland, with almost religious fervour, should be stopped, and the sooner the better for Scotland. Scotland should be free to formulate her own Budget and to realise her own prosperity, taking into account her industrial and economic resources and aspirations.

7.47 p.m.

Mr. Eddie Loyden: I do not want to follow the speech of the hon. Member for Perth and East Perthshire (Mr. Crawford). I am sure that an hon. Member from the Government side with a Scottish constituency will, if he catches your eye, Mr. Deputy Speaker, be able to take up the points that the hon. Member raised.
Nor do I want to follow the speech of the right hon. Member for Farnham (Mr. Macmillan), because I am sure that it has been made regularly since the time of Disraeli. The pronouncements of the right hon. Gentleman about the economic situation and the remedies that he proposes are a long-standing central feature of Tory Party policy. The people of this country have been frustrated by the

inability of succeeding Governments to resolve our problems—not necessarily and exclusively those of Governments, but emanating from the system.
In these days Budgets cover a far wider range of our social and economic life than they did in the past. Budgetary policies are becoming more and more important from the point of view of industry, social progress and all the things that Governments exist to do in the name of the people.
My right hon. Friend the Chancellor of the Exchequer said that the period that we are in at the moment did not begin in 1969 or in 1970 but was part of a longer-term economic and industrial decline that had been going on for 30 years and more. We have seen succeeding Governments, by all sorts of ingenious means, such as national plans, guiding lights of incomes and prices and other fiscal measures, attempting to deal with the major problem that has faced this country, namely, the continuing and increasing decline of British industry and its consequences upon social progress. It is a problem that brings in its wake mass unemployment and the attendant difficulties that we see today.
Government supporters believe that Government intervention is necessary from time to time, whereas Opposition Members argue that we suffer from too much Government intervention. I remind the Opposition that had it not been for Government intervention in the post-war years, with the nationalisation of our basic industries, the British economy today would be not in a terribly bad state but bankrupt and probably nonexistent. What is more, there has been no attempt by successive Conservative Governments to remedy what they consider to be the central problem by denationalising those industries and thrusting on to the private sector the responsibility of providing the country with the services that it requires.
What many Government supporters criticise is not State intervention but the form that it takes and the formulae being used by the State in that intervention. It can be argued that budgetary policy extended into a very complex industrial society can mean the continuance of State intervention. However, in 1973, when the Labour Party's Green Paper on industry was produced, many of us saw


the first winds of change that were blowing through the minds of the leadership of the party about not wanting continually to repeat the mistakes of the past but to look again at policies so that they could be set out in more exciting terms and could tackle the problems of the country in the post-war years. That Green Paper said that although the fiscal policies that previous Governments of both parties had carried out had some marginal effect in dealing with the areas of difficulty at which they were aimed, in the final analysis there had been no real restructuring of industrial power and, therefore, inevitably we fell into the same sort of morass that every preceeding Government had after carrying out their so-called provisional and immediate steps for some sort of social reform.
It was against that background that many people in the Labour movement recognised that the 1973 Green Paper provided a different set of conditions under which the changes that we intended to bring about could best be achieved. That was mainly through tackling industry by means of planning agreements and the National Enterprise Board. No one suggested for a moment that of themselves they would create a situation in which the problems of British industry could be resolved over-night. However, we were convinced that unless steps of that kind were taken British industry would continue to decline, unemployment would continue to rise and, no matter what carrot or sugar was used—I have never seen any real sticks being used—there would be no guarantee that the resources would find their way into the sections of British industry that were starved of capital investment.
At the peak, when about £2 million of public money was being pumped into the private sector each day, there was no evidence to suggest that it would result in a revival of British industry and that those resources, drawn from the wealth created by working-class people, would find their way back into industry for investment and for the purpose of helping British industry to expand. It is nonsense to suggest that all that we have to do is to make profitability certain for British capitalists to react in a gentlemanly fashion and see that the contents

of their money bags are invested in areas where it is needed.
It was for that reason that to Government supporters the National Enterprise Board, linked with planning agreements and the need for resources, came as a welcome and positive change. The Labour Party had fought both the 1974 General Elections with industrial recovery as the central theme of its manifesto. We expected budgetary policy to play a large part in seeing that the necessary resources were made available to the NEB and that, linked with planning agreements, it could begin the process of planning our industry and ensuring that the resources necessary to refurbish it were available.
From 1974 onwards, we have seen a weakening of the concept of the NEB and a ridiculous situation in which about £1,000 million has been made available. That has now been cut to £950 million. Subtracting the demands of Rolls-Royce and Leyland, there remains about £500 million available for the NEB to bring about the miracle of reviving British industry. I do not believe that anyone can accept that as a serious effort to establish a National Enterprise Board in a meaningful way, or that it will begin, in the transitional period between now and the fulfilment of the promise in the Labour Party manifesto, to take irreversible steps to gain the fullest advantage for those who produce the nation's wealth.
In this and other debates, the Opposition have argued that any suggestion of planning agreements and their linking with State-owned banks is full-blooded Marxism, which should be rejected by the House. I remind the Opposition that in France the central banks are already linked to the planning units. I am sure that no one would attempt to argue that the French Government were carrying out full-blooded Marxist-Socialist policies. The Opposition often applaud other European countries for their economic performance. Among others, Italy has accepted planning agreements and the concept of a national enterprise board of the kind that the Opposition resist constantly in this House.
I should have thought that in this Budget the Chancellor would have put resources into the National Enterprise Board and the planning boards instead of


their being ploughed into the private sector. There is no evidence to show that once those resources have been made available to private enterprise they will be used for the purposes that the Chancellor intends.
I am disappointed with the Budget. One of the things that my hon. Friends and I are concerned about is the level of unemployment. Until we tackle the basic problems of British industry we shall continue to have high unemployment.
We expected from this Budget, as part of the social contract, resources being directed to the recovery of British industry. It is unfortunate that the necessary steps have not been taken. The steps that have been taken will not succeed and, therefore, we shall continue to have high unemployment, with all of its serious consequences on the future of the nation and its people.

8.2 p.m.

Mr. Robert Adley: I congratulate my hon. Friend the Member for Wirral (Mr. Hunt) on his outstanding speech. I hope I will not embarrass him by saying that we have been friends for many years. Despite the pressures on him during the recent by-election he was due to speak in my constituency and kept his commitment. This is a tribute to the character of a man who will play a notable part in our proceedings in the future.
I take a rather different tone in looking at this Budget from that of some of my hon. Friends. This is the first time I have spoken in a Budget debate. I thank the Chancellor for listening to the representations he received from a number of MPs about the effect of that 25 per cent. rate of VAT on a number of industries and particularly on employment. In my constituency many jobs were lost in the boat-building industry, and I am very grateful to the Government for listening to the pleas showered upon them. Even in the last few days some of the boatbuilding companies in my constituency have told me of a marked upsurge of business interest, and the companies which were laying off people hope to reverse that trend shortly.
When my right hon. Friend the Leader of the Opposition opened the debate she said the Budget might possibly cure the

nation's influenza, but would no nothing to cure the cancer. It is reasonable to hope that the cure my right hon. Friend discerned in the Budget might possibly prolong the life of the patient until new ideas or a new Government come along to tackle the cancer before it is too late.
As my right hon. Friend the Member for Worcester (Mr. Walker) said, the last two years have seen a 54 per cent. increase in earnings and a 4 per cent. decline in production. This cannot go on. The problem of an ever-accumulating international debt cannot continue and the drastic decline in the value of sterling must alarm us all.
I wish to examine what my hon. Friend the Member for Blaby (Mr. Lawson) called the Chancellor's deal with the trade unions, because in the last few days, since I first heard it, my instinctive reaction, which was the same as that of my right hon. Friend the Leader of the Opposition, has been modified by talking to people who, like myself, are not blessed with the wisdom and understanding of all the economists who surround us in the House. Nevertheless, I offer the Minister a warning which I hope he will take in the spirit intended. Millions of our people are affronted, offended and confused by the way in which the Chancellor has presented his proposed package of tax cuts, subject as they are to agreement with the TUC. A constituent wrote to me saying:
I've no wish to be a member of any union, and completely fail to see what right a union, or Healey for that matter, has to decide the level of income tax I will have to pay.
The Chancellor must explain in more detail, therefore, the proposals he is presenting, because not everybody understands them.
I have the temerity to believe it is as a result of the way in which the nation voted in February and October 1974 that we now find ourselves in the position where the Government are unable to introduce the Budget they think is right without the acquiescence of an outside body.
In another letter I received today from Leamington Spa, the writer confirms my views by saying that
we have got used to putting comfort before principles".
If that is true, it is sad. It is also an acknowledgment that in the 1974 elections the people of this country voted to


allow the trade unions partly to dictate this country's economic policy. That is not the best way to run a democracy, but it is a fact of life.
I accept and appreciate the arguments about constitutional monstrosities: but there are two ways of looking at the proposition—the Oxford Union attitude and the bus-queue attitude. In the bus-queue attitude I discern rather less hostility to the Chancellor's proposals than has been shown by a number of hon. Members.
If an incomes policy helps to control inflation, it is not a weapon we should toss aside. I am not fanatically pro or anti an incomes policy, but inflation is the most serious problem and if the Chancellor's propsals can help to control it I wish them good luck.
Our inflation is being escalated very badly by the depreciation of our currency. The remarks by the Leader of the House this afternoon about the depreciation of sterling being an inheritance from the last Conservative Government are untrue and do not bear any relation to the statistical facts. The hon. Member for Cornwall, North (Mr. Pardoe) produced another of his historical statistical inaccuracies. He said, at column 689 of the Official Report on 8th April, that when the Conservative Government came to power in 1970 the pound stood at $2·80. In fact, the pound stood at $2·39 at the time of the change of Government from Labour to Conservative in 1970. The pound was $2·39 in June 1970. It climbed to $2·61 by May 1972. We then had the oil crisis, but in spite of the oil crisis and the three-day working week, the pound was at $2·22 when the Conservative Government left office, and when that Government left office that was the pound's lowest point during the Government's lifetime. In other words, the £ fell when it seemed that the Conservative Government might leave office.
The fact is that Stafford Cripps devalued the pound from $4 to $2·80, the present Prime Minister, when he was Chancellor, devalued the pound from $2·80 to $2·40, and the pound fluctuated and floated during the period of the Conservative Government but it declined only marginally as compared with the situation under previous Labour Governments

and it was certainly a long way from the way in which the pound has since been devalued from $2·22 to $1·85 under the stewardship of the present Chancellor.
The Labour Party is the party of devaluation. It is quite unable to escape that title. It seems to indicate that if that $2·22 was the lowest point at which the currency stood, at the end of the Conservative Government's time in office, as a result of the three-day working week, the implication is that the National Union of Mineworkers, Mr. Scargill and Mr. McGahey were those who knocked the value of the pound down to its lowest point under that Government.
As my right hon. Friend the Leader of the Opposition said in her reaction to the Chancellor's speech, the world assesses and decides what the level of our currency should be. My right hon. Friend said:
That is the best barometer of the world's confidence in the right hon. Gentleman's stewardship."—[Official Report, 6th April 1976; Vol. 909, c. 284.]
The world has indeed assessed the value of the currency under the present Budget. For the present Chancellor of the Exchequer, Mr. 8·4 per cent., now to tell us that he is curing inflation is rather like a man who has gone around the countryside for 18 months behaving like an arsonist suddenly trying to behave like a fireman. Notwithstanding his previous behaviour, if he is now behaving like a fireman he needs some support.
If, as a result of his Budget, he is successful in what he is seeking to do, namely, to ensure that the unions add to their power the responsibility which many of us feel they have never been willing to take on their own shoulders, he will be doing a service to this country and he will be helping, perhaps slowly, to change the rôle of the trade unions in our society. That is why I suspect that many Members of the Tribune Group are so totally opposed to the Government's proposals.
I should like to ask the Minister whether or not he thinks this is feasible: could he find some way of encouraging rank and file trade unionists actively to participate in reaching a decision. Perhaps he could provide a State-funded postal ballot for trade union members so that they could tell their union leaders what their views were on the acceptability


or otherwise of the Government's proposal. It could well be that the Government find themselves pleasantly surprised at the degree of support which this proposal commands on the shop floor. The fact that the Chancellor's proposal is contrary to the wishes of the Left-wing extremists of the Labour Party will surprise no one who is a student of the current British political scene.
I conclude by repeating the words of the hon. Member for Luton, West (Mr. Sedgemore). He described this Budget as "a bungled piece of mismanaged capitalism". In the parlance of today's politics, capitalism, for the left wing of the Labour Party, means the mixed economy—because what they are really after is total Marxism. I am sure that the hon. Gentleman is right and that there is much to commend him for saying that. I leave it to those more eloquent and versed in economics than myself to dissect the Budget for its economic content.
However, a Budget that proposes to cut direct taxation, to reduce value-added tax on non-essential items and to raise the level at which cash gifts become taxable may not be the worst thing that has happened to this country since the present Government took office. I understand why the hon. Member for Bedwellty (Mr. Kinnock) came out so strongly against the Chancellor's proposals. It would not be the first time that I have said that what is good for the hon. Gentleman is not too bad for the rest of us.
Without any control of inflation the pound will fall further. As my right hon. Friend the Member for Farnham (Mr. Macmillan) said, we must face the impending disaster of a collapsed currency. I fear that the near future could indeed bring us face to face with a disaster, where the pound fell to such a level that our overseas suppliers of food would say "Enough is enough. We refuse to be paid in pounds." The end of that story would be trouble in the streets, and that, surely, none of us could remotely want.
Therefore, in spite of all the criticisms that I have of the Budget's underlying failure to tackle our economic problems, particularly the point about cutting public expenditure, which my hon. Friend the Member for Blaby put so eloquently,

I believe that the Chancellor has shown a glimmer of understanding of what he has to do to try to control inflation, and I wish this particular aspect of it well.

8.16 p.m.

Mr. Richard Wainwright: In the view of Liberal Members, the grave defects of the Budget flow inevitably from the posture into which the Chancellor and the Government as a whole were driven many weeks before the Budget speech was delivered. The Government had got into the position in which, financially, they had to spend so much to buy the £6-a-week policy that they had very little left with which to bait the hook for another year's policy. They had practically nothing left, as the Budget so lamentably shows, to offer any incentive to the various groups that have suffered so dismally under inflation and who badly need something to get them back on the dynamic path.
Administratively, the picture is even worse. I, for one, having been elected to this House in 1966, have never sat through a Budget in which so many failures to advance have been attributed to lack of administrative apparatus. For instance, let us consider the appalling rate of marginal tax at the crucial point of a young business executive's career or, indeed, the career of a professional scientist or anyone else approaching a responsible stage in industry or the professions. That flows from the fact that the Chancellor is unable to follow his proposals for taxing perks realistically right down the income line, and the fact that on his own admission the Inland Revenue was not in a position to apply that new stringent taxation to anyone earning less than £5,000 a year, unless he happened to be a director of a company. That sort of administrative hiatus—that failure simply to provide reasonable administration for the country—creates a marginal blow in the tax structure that will, I am sure, deter some people from accepting advancement to directorship.
When I was practising as an accountant, even with the former comparatively mild taxation on perks, I had cases on my files—not many, but two or three—of people who said "No thank you" to a directorship, so long as they could continue as a manager, because they did not


want to get into that band. How lamentable it is that now, at long last, the Chancellor is catching up with some people's perks but has to stop at this totally arbitrary limit of people earning £5,000 a year or those who are directors.
Similarly, the sheer lack of administrative apparatus—or, as I believe, the lack of will—to impose the Chancellor's policies prevents his going back to those splendidly equitable devices, the reduced rates of income tax for those whose incomes first hit the income tax threshold. It is crazy that we, alone of all the countries in Western Europe, should insist that once a taxpayer reaches a threshold that has been greatly dimished in value by inflation he should hit the income tax rate at its full standard level. Every other Western European country has a devise for softening the blow for the first £100 or £200 of income, or their equivalents, but we cannot do so because, apparently, we do not command the administrative apparatus for that comparatively simple task.
Then—I need not take up the time of the House on this for more than a moment, since others more expert than I have already put the point on record—there is the disgrace of the widening of the poverty trap, with the astonishing state of affairs that it is necessary to extend family income supplement up to a personal earnings level of £39 a week when there is only one child in the family, yet tax for such a person starts in some cases at a mere £1,500 a year gross income.
The final item out of many which I could cite as attributable to sheer administrative malaise and sheer lack of good government is the appalling comedy of stock appreciation relief for corporation tax. Of course, the great mass of industry and commerce will not look a great big gift cart-horse in the mouth. People will not complain about its manifest lack of intellectual basis or manifest crudity—the "banana republic" aspect of the sheer lottery of stock appreciation relief, depending, as it does, on chance as to whether one qualifies—because, from industry's point of view, it is such a massive relief in quantity.
Neverthless, it should be put on record that this relief, the total cost to the Exchequer being over £2 billion a year,

will be distributed among corporate taxpayers according to the level of their stock on one particular day in a whole year. Moreover, it is a figure which can undoubtedly be manipulated far outside the detective range of the Inland Revenue, and, indeed, it is in many cases a figure which will indicate a built-in inefficiency in the business concerned, showing a maintenance of stock far above what is really justified.
That all these incidental matters should affect the distribution of a huge portion of taxation is a grave reflection on a country which was once able to pride itself on having the most refined and most equitable tax system in the world. But there we are. It is all due to the strain past to a point at which, apparently, it put on the administrative machine in the can take no more.
Since I wish to be brief, I come quickly to what most hon. Members have acknowledged to be the crunch item in the Budget, the offer to the TUC. Here, I should point out that Government spokesmen have missed the case which has been made by some of my colleagues in the Liberal Party about the nature of the constitutional outrage. What we regard as the real constitutional outrage—the point at which impropriety becomes outrage—is that the Chancellor of the Exchequer is telling the TUC that, if it does not like the idea of a 3 per cent. norm, it can refuse the option, and, according to the Chancellor, all that will happen is that his particular offer of tax reliefs will be partly withdrawn. The child allowance reliefs will stay in any case, but the others will be withdrawn, and the implication is that, if the TUC will not play, the country will sail on with just a little more inflation, rather more unemployment and a lower growth rate.
It is that which is utterly "phoney" and a betrayal of the way in which the House of Commons is supposed to look after the nation's affairs. The truth is that if the TUC is not prepared to accept something pretty close to 3 per cent. as a norm, the alternative will be ferocious. It will certainly involve submitting to fierce conditions imposed by foreign lenders who will have to be approached if our wage payments get out of control. Also, it should mean—this is where the


Liberal view especially comes in—a reversion to a statutory policy.
During the past few days, when some of my right hon. and hon. Friends have said that they will be willing to support a policy of that kind, they have spelled out what they mean. In particular, my right hon. Friend the Leader of the Liberal Party said that by support we Liberals mean support for a Government who will have the guts to say that, if a voluntary policy cannot be satisfactorily negotiated, Parliament must enact a statutory policy.
We learned today from the ex-Secretary of State for Employment, now Leader of the House—he put it quite categorically—that he is in no circumstances prepared to introduce a statutory pay and prices control policy. Since the Government are taking that line, it is clear that they do not want support from the Liberal quarter, and it is equally clear that they will not get it for a policy which is now revealed to be so manifestly phoney.
I repeat that if, as a result of the ill-phrased and ill-conceived Budget speech, there are trade unionists who think that they have the soft option of saying "No, on the whole, we do not like the Treasury's arithmetic, we think that it is all very niggling and problematical, so 'Thank you very much', we shall not accept your tax reliefs and we shall not have anything to do with the 3 per cent. norm", and they imagine that all they will have to put up with is some minor discomforts as a consequence, they are grossly misled, and they have been misled by the Government themselves.
For that principal reason, I shall recommend my right hon. and hon. Friends to vote against the first Resolution tonight.

8.26 p.m.

Mr. John Watkinson: I associate myself at the outset with the remarks of the hon. Member for Colne Valley (Mr. Wainwright) about the effects of our present fiscal arrangements with respect to the poverty trap, but I join issue with him on the constitutional question of the pay policy and the impropriety which he sees engendered by the Chancellor's novel proposal.
In fact, the Chancellor has merely stripped away the secrecy which normally

surrounds such negotiations and has had the courage to present to the House and the country at large the proposals which he is prepared to put to the trade union movement. The alternative to that, the hon. Gentleman seemed to be saying, is that he should have come to the House and said "This is the Government's policy. You will like it or lump it". That seems to me to be a return to the era of confrontation which we had under the previous Tory Administration. In my view, it is far better to approach the trade union movement—no one doubts the importance, power and significance of that movement—and to present it with an offer as a negotiating start to what will be the next pay round. If co-operation involves, as the Opposition say it does, the creation of a corporate State, I have no objection to it and I support the Chancellor's novel proposal.

Mr. Adley: Does the hon. Gentleman not agree that in February 1974 the Conservative Party went to the country and said that it believed that Parliament alone should ultimately be the determinator of policy? It is because a large number of people could not make up their minds whether they were Socialists and finished up voting for the Liberal Party that we are now in this position.

Mr. Watkinson: I do not agree. The Prime Minister of the day involved himself in a form of confrontation, which the right hon. Member for Down, South (Mr. Powell) said at the time was totally unwarranted, unnecessary and arguably unconstitutional.
Most reasonable people are agreed upon the necessity for a pay policy in the sense that we should attempt to achieve some form of agreement with the trade union movement on the levels of pay increases over the next period. That will be to the advantage of the country because the alternative—as spelled out by the Yorkshire miners' leader, Mr. Scargill—is that if he has his way there will be a 33 per cent. increase in wages in the next year. We know the tremendous power of the miners' union and we know about the effects of its previous action. Supposing the miners' union decides to go for 33 per cent. and gets it, every union leader worth his salt will be in there fighting for a similar amount for his members. Such an alternative implies a


test of virility and we would be faced again with spiralling wage inflation. I have to accept that increased wages are an element in inflation and that they must have an effect on the level of prices.
It is necessary for the Government to engage in these negotiations with the trade union movement and for them to reach some form of agreement—whether it is 3 per cent. or some percentage higher is not for me to say. The only alternative is the policy advocated by the Opposition Front Bench involving a crude monetarist approach.
The Government and any Government, have an obligation to bring inflation under control. If it cannot be done through agreement with the trade union movement, the only recourse left is strict monetary control, which is part of the Opposition's thinking. I do not kid myself that the Government are not pursuing money control at present. It is quite clear that they are, because they boast of controlling the money supply. But the Opposition's kind of monetary policy would be of a stricter variety.
The operation of such a monetarist policy would be uncertain, arbitrary and impartial it would mean that there would be a given amount of money injected into the economy. Firms which might agree to pay wage increases would find that they could not afford them and would become bankrupt. Crude monetarism would apply to firms which wished to borrow money but could not extract it from the banking system because it had been pre-empted. Such a form of monetarism would be arbitrary and would create mass unemployment. It should be rejected in favour in some form of co-operation with the trade union movement, and that is why I support my right hon. Friend the Chancellor in this respect.
I turn now to the problem of investment. We have often argued the case for increasing the level of investment, and yet we are witnessing a fall in the level of investment. Everyone agrees that it is vital to expand the manufacturing base of our economy. The Government were right to take the decision in the public expenditure White Paper because it is an attempt to cut back on the borrowing requirement and to transfer resources to the manufacturing sector.
I share with some of my hon. Friends doubts about the viability of that proposal. Mere verbiage in a White Paper does not necessarily ensure an injection of investment into the economy. I should like to see a counter-cyclical investment policy hammered out by the Government, to be imposed when the so-called upturn comes, ready for use when we experience the next downturn. We all are subject to the trade cycle. It is necessary to grapple with that problem now. The Government might look at the system in Sweden, where investment funds from private enterprise are channelled into a fund during the upturn and kept there during it. In the downturn they are released at a favourable rate of interest to encourage firms to invest.
We need to inject more capital into our industry. There is no shortage of funds. They are available, but are not being taken up. We need an added incentive to encourage firms to take up investable funds. If that means intervening in the money market to ensure that firms can borrow at a lower rate of interest, I would support that, too.
I turn to the problem of the balance of payments, which seems to be crucial to to the country's long-term future. We have produced a marked improvement in the trade balance over the past two years. Even so, we are running a deficit of more than £1,700 million. That is in slump conditions. What would the deficit be if we had full employment? I am interested in the observations of the Cambridge school, which suggests that in that situation the balance of trade deficit would be more than £4,500 million.
We all agree that it is our aim to produce fuller employment, yet we have a propensity to import which, unless we are prepared to take action, will have the effect of dampening any upturn or boom which may be generated in this country, as it has in the past. As the upturn comes and we suck in more imports, we shall have to face the prospect of borrowing abroad, and if we cannot do that we shall have to impose deflationary measures.
I note with interest the figures in the TUC document, which are generally accepted. The TUC points out that, on past trends, for every 1 per cent. expansion of GDP we increase our imports by 1·8 per cent My right hon. Friend the


Chancellor has said that we must aim at a 5·5 per cent. expansion of the domestic economy over the next few years. If that is achieved, and if the figures I have given are correct, there will be an increase in imports of more than 10 per cent., which means an added bill of over £2,500 million to the balance of trade.
How do we finance that? Can we finance it? We know that North Sea oil is now coming in and we know that it will have beneficial effects, but it is not coming in rapidly enough to ensure that we can finance the sort of balance of payments deficit which the growth targets the Chancellor has set may cause.
We must face the fact that there has been a massive import boom. It could be said to have been engendered since we entered the Common Market. There are those who hopefully say that the trend was established only two or three years ago, and that it will evaporate. I have doubts about that. At least we should prepare for the situation. It it does not evaporate, if we continue importing at the present level, we must face the fact that the balance of payments problem, as in the past, will again retard growth and the return to full employment.
It is important that we at least consider the possibility of some form of imports control, whether it be of temporary or permanent nature. I should prefer some form of temporary control. Unless that control is introduced, and unless we take within our own hands the ability to control the balance of payments imbalance, any prospects we have for sustained economic growth will, as in the past, be impaired.
One of the basic problems which confronts the Government in their long-term growth aim and the return to full employment lies with our balance of payments. It is a matter of the greatest concern. The Government should be considering their plans and proposals, for unless we are prepared to deal with the balance of payments problem, and unless we can solve it, we shall not return to the full employment and growth which we all want.

8.42 p.m.

Mr. Michael Shersby: I join my hon. Friends in congratulating my hon. Friend the Member for Wirral (Mr.

Hunt). He spoke movingly, bringing to mind the terrible problems of unemployment which exist in his constituency and the concern for the future in his constituency which is felt by local industry. I hope very much that we shall often hear from him.
I listened with great interest to the hon. Member for Gloucestershire, West (Mr. Watkinson). Perhaps he will forgive me if I do not take up all his points.
This is the first time that I have spoken in a Budget debate. I have been in the Chamber for a good deal of the debate and it seems that the success or otherwise of the Chancellor's Budget strategy depends, first, upon an acceptance by all sectors of the population of a continuing incomes policy. Secondly, it depends on the reduction of public expenditure. Thirdly, it depends on real growth in the economy. Only if those three conditions are achieved can inflation be brought under control and unemployment reduced.
It seems that the prospects of the Chancellor succeeding in achieving those conditions are somewhat remote, to say the least. They are remote because, first, it seems less than likely that the unions will accept the deal as it is proposed and as it stands. Secondly, the Chancellor is not proposing any substantial reduction in public expenditure. Thirdly, there appears to be little prospect of achieving the growth that is so desperately needed.
It is of very little use for the Chancellor to specify conditions for increasing growth and reducing unemployment when they depend upon unrealistic targets, such as increasing GDP by 5½ per cent. and manufacturing output by 8½ per cent. over the next three years. Despite all the fanfare accompanying the launching of the Government's industrial strategy last November, little progress has been made during the recession in tackling Britain's underlying structural weakness. We are still baling out lame ducks instead of backing winners.
The problems of restrictive practices and overmanning are worse than ever. The opportunities for major retraining have been almost completely missed. It has been said that it requires an economic miracle to achieve the Chancellor's


targets. In my opinion it requires something much more. It requires the Government to tell the people the truth about Britain's sorry plight. It requires immediate measures to cut public expenditure and the public borrowing requirement.
How can the Chancellor expect the population to believe that there is any real chance of success when he is prepared to saddle it with a public sector borrowing requirement of £12 billion? How can he expect everyone in industry to give of their maximum effort, whatever changes he makes in the level of taxation, if they know in their hearts that they and their children are to be in debt for such a massive and staggering sum? How can the young of Britain feel that there is a real future for them while public expenditure goes on rising and at the same time we are plunged deeper and deeper into debt? These are the central points of this Budget that transcend almost everything else.
I accept that it would be difficult and painful to cut public expenditure, limit pay increases, and endure continuing unemployment. But at least that approach to our problem would give people the one thing that they lack at present—that is, a real hope for a better future under this Government. If people see public expenditure being reduced and a shift of resources to industry, they can have hope for the kind of economic miracle that Britain so badly needs.
I believe that the people would much prefer to support clear and honest policies than that we should continue as we are now doing. The public do not believe that once we have achieved agreement on wages and salary limits, that will get us out of our present troubles. There is a feeling shared by many people that by this time next year we shall be no further forward and that the pound will continue to slide and our debts will continue to mount. I ask the Chancellor to appeal to the patriotism of British people to meet the task that lies ahead.
I turn to the Chancellor's proposals on a continuing incomes policy based on a low pay limit coupled with increased tax allowances. I support the concept of the lower pay limit on the basis that the real value of incomes would be higher and prices lower than they might otherwise

be. But we can support this idea only if it applies irrespective of the level of income. It would, for example, be unrealistic to expect acceptance by all sectors of the public if the upper limit on pay increases were to be continued.
I accept that it is right and proper for the Chancellor every year to have consultations with the unions and with industry on the levels of pay. It is right for the Chancellor to take the temperature of the trade union water and to see what the traffic can stand. I have reservations about the proposals he makes whereby tax concessions will be conditional upon the approval of the TUC. Not only could this proposal weaken parliamentary control of the economy but it could exclude from participation in discussions on wages policy the majority of the work force, who are not trade unionists.
Moreover, it will place the Chancellor and Parliament in a very difficult position if the pay limits are broken either by unions or even by a large and powerful group of workers after Parliament has passed the Finance Bill. It could also lead to the TUC attempting to attach other conditions to any pay deal and the suggestion of import controls. This could lead to drift and could result in the whole policy broadening out in a way the Chancellor cannot at present foresee.
To me perhaps the worst prospect is a possibility which I hope will not occur—namely, that there will be no deal with the unions. If that should happen, the situation will be grim. Inflation would increase rapidly by next year and would be accompanied by increasing social and political tensions.
For all these reasons, while not particularly liking the way in which the Chancellor is approaching the problem, I believe that it is in the interests of the country that, if a deal is to be struck, it should be struck quickly. I believe that this House should not accept unreasonable delay or any unnecessary prevarication by the unions which would put at risk the lives of our working population—people whom we all represent in this House.

8.50 p.m.

Mr. Tim Renton: Unless thunder or lightning strike me down within the course of the next 10 minutes, I


shall be the last Back Bench speaker, I believe, in this debate. It is hard, at the end of a four-day debate, to think of something that is notably different from the situation as it prevailed at the beginning. But in this case there is a difference—the pound is approximately 4 cents, lower against the dollar. Viewed against a Budget, the initial reaction to which was that it was quite favourable for the City and industry and that the gilt-edged market and the equity market might improve, it is fair to ask why sterling has fallen consistently during this debate.
The answer lies in one simple fact. The Chancellor has still refused to deal with the problem of the public sector deficit and the ensuing borrowing requirement. It is from that one fact that my right hon. Friend the Member for Brighton, Pavilion (Mr. Amery) was moved to remark earlier today that we stand on the edge of a catastrophic situation.
I have always wondered at what point in time people realise that they are falling over the precipice, at what point in time inflation turns into hyper-inflation.
I suppose that even for those living in the Weimar Republic it was difficult to nail down the precise moment. But with the continuing decline in the value of the pound, the fact that a number of vital imported commodities have gone up in price by 20 per cent. in just one month, from 9th March to 9th April, we cannot be far away from that moment of catastrophe. Yet the Chancellor does nothing about it. I feel that as a good classical scholar he may see himself in the role of Ouintus Fabius Maximus the famous general who, it will be remembered, restored the State of Rome by delay, by doing nothing. It is much more likely that history will cast the Chancellor in the rôle of Nero, worried about tax fiddles while the sterling rate burned.
I hope that when the Chancellor replies tonight we shall hear far more about how he proposes to tackle this ongoing deficit and the borrowing requirement than we heard in the almost odiously confident speech made by the then Paymaster-General on Wednesday when he drew the analogy that, because the Government had been able to finance the deficit in a year of world-wide recession, they should be able to finance it in a year in which the Government are

seeking an unparalleled increase in economic activity. The paradox is so obvious that I am amazed that the Chancellor has not already felt it necessary to deal with it.
When the right hon. Gentleman replies tonight I hope that he will tell the House in particular what figure he forecasts for domestic credit expansion in the year ahead. As the House knows, DCE is the volume of bank credit to the private and public sector. In January the Chancellor and the IMF forecast that DCE would expand at the rate of about £9 billion. That figure will have to be much reduced.
Because of exchange support operations in the past few months the Government must, by now, have acquired about £1 billion sterling which will have flowed through the exchange equalisation account into the public sector. I hope that the Chancellor will be able to tell us that the DCE figure he forecasts for the year ahead is a lot lower than that £9 billion; hopefully it should be of the order of £6 billion or £7 billion. It is only on that basis that some confidence can be restored to the gilt-edged market and to the sterling exchange rate. Without that confidence the whole strategy of the Government for the year ahead must come to nought.
The idea of linking tax concessions to pay policy is imaginative. I hope that it succeeds. However, it is clear that the final decisions must be taken here, in this Chamber, and not by debate through articles in the News of the World such as that which appeared yesterday.
I should like, last of all, to deal with the problem of the young talented executives—the research chemist, the production engineer, the man in his late twenties or early thirties who has not yet any children at school. The world is his oyster and he is beckoned by international companies from all continents. He is the pearl which companies must retain, or win, if they are successfully to develop new plants and to export all over the world. What is the current pay for a research chemist in this country compared with what such men can earn abroad? Here he is likely to be receiving a salary of about £6,000 a year gross. Before the Budget this would have been about £4,200 net, after tax. In the United States he would get £8,200 after tax; in Belgium £7,650; in France £8,950;


in Holland £7,000 and in Germany £8,130—in each case approximately double what he is getting in this country. Yet all the Chancellor has been able to do in his Budget is to promise these key individuals an after-tax rise of about £125 to £150, and even that is conditional upon the agreement of the TUC.
This problem of reward to key management was well illustrated in the annual report of ICI, which showed that the number of people in its company earning £10,000 a year or more gross had risen from 55 in 1967 to 1,377 by 1975. However, that is gross. The charts which the company produced showed that taking into account the effect of increases in the cost of living but ignoring tax, the number of 55 had become 60 by 1975. But taking into account taxation as well as inflation, the number has been greatly reduced. In terms of equivalent take-home pay, 55 in 1967 has become two—just two—in 1975. Yet these are the key people whom this country must keep if we are to push productivity, investment and manufacturing output up and up as we all wish. Let fringe benefits be fairly taxed. I have no great objection to that. However, there must in years to come be a flattening out of the higher tax rates on earned income far beyond anything which the Chancellor has yet proposed.
This country will never succeed as long as we hamstring the best among us. "The tallest nail invites the hammer" is the Chancellor's motto. My God, how he has hammered them in the past two years! But it is the tallest nails which bind bridges and unite buildings. Let this Government cease the politics of envy and start to give back incentive to those who create the profits out of which the corporate taxes, which the Chancellor desperately needs, will be paid.

8.59 p.m.

Mr. John Nott: The debate has been characterised by rather empty Government Benches, three excellent maiden speeches, and a Cabinet reshuffle. One of the performers on the Government Front Bench was plucked, fresh and still squawking, from the Dispatch Box and, although the Chief Secretary is still with us, determined, as he has told us a hundred times, not to be provoked, we shall miss the Paymaster-General. The

Chancellor of the Exchequer is still with us, bottlenecks and all, and I shall have more to say about him and his policies.
At one stage I was a little concerned that the squatters might move into the empty premises here, but one or two hon. Members who left after the vote last Monday returned today after an arduous week in their constituencies. Things have livened up a little compared with the situation over the first three days of our debate.
I wish to congratulate the Secretary of State for Trade on his appointment. It is unusual for a Minister to be promoted after saying so many sensible things; it would not have happened under the old regime. It seems that after what I call the hokey-cokey, the leadership election, the new Cabinet has taken a decisive shift to the right; that is the fear of the hon. Member for Tottenham (Mr. Atkinson). No doubt this will increase the feeling of unity in the party. We shall have to see.
My hon. Friend the Member for Wirral (Mr. Hunt) made an outstanding speech. None of us would have expected any less from him. He spoke with feeling about the grave unemployment problems on Merseyside, particularly among school leavers. It was encouraging to hear his view, which was echoed by the Leader of the House, that the power of Parliament has not diminished and that Parliament's importance as the protector of individual freedoms grows daily. We agree with that. If my hon. Friend does not hold every one of the high offices held by his predecessor, he must not be disappointed, but I expect that he will achieve at least one of them, and that in itself will be remarkable. We welcome him, and I know that we shall hear many more excellent speeches from him.
The two other maiden speches were very interesting. The hon. Member for Coventry, North-West (Mr. Robinson), who was rather busy on the day on which he spoke and could not be present for the concluding speeches, talked about industrial democracy. Equally interestingly, he talked about Coventry. As he was speaking, I wondered why, when this country can boast the skills and engineering excellence which is represented by Coventry, we are in this frightful mess. For all our troubles, I still find it impossible to believe that England—and I say


England deliberately—with good sense and good government, is not capable of recovery.
My hon. Friend the Member for Carshalton (Mr. Forman) may have partly answered the question why we are in a mess. He talked of the wishful thinking which pervades our attitudes, the heroic targets which the Government have set themselves, and the 5 per cent. a year rise in the GDP for the next three years anticipated by the Government. I remember well what the Chancellor of the Exchequer and his colleagues used to say to us when we were seeking to achieve a 5 per cent. growth out of a downturn. My hon. Friend said:
I shudder to think what
such heroic target
would almost certainly mean for the balance of payments and hence our ability to go on borrowing from abroad. The House and the nation are being invited to go on yet another of the Government's miraculous mystery tours, the final destination of which is all too likely to be economic ruin.
In that uncontroversial spirit which so marked my hon. Friend's maiden speech, he said
that the sooner the people of this country have the chance to get rid of this Government, the greater will be their chances of saving themselves by their own exertions."—[Official Report, 8th April 1976; Vol. 909, c. 674.]
That is true.
Before commenting on the major strategy of the Budget, I wish to say a few words about its details. The hon. Member for Ince (Mr. Maguire) sounded the most authentic note of exasperation we have heard in the debate. I hope that the hon. Member will not mind my repeating the sad case of his own disabled son who receives £120 in interest from a small sum subscribed by the men at the pit in which he worked before his accident. The hon. Member for Ince told us that the Inland Revenue claims that this interest is taxable and he added:
as the law was designed to catch those who were giving money to their sons to avoid tax, I was ensnared.
He went on:
I have a deep suspicion about any proposed changes in the tax law, the efficacy of which will only be known later, because others are often dragged in and have to pay the penalty."—[Official Report, 6th April 1976; Vol. 909, c. 299.]

That is the point which we have repeatedly made from this side. It is all very well taking measures against tax avoidance to catch one or two prominent people who have been avoiding tax, but social justice is more important.
If the hon. Member for Ince could get his colleagues to support a Conservative Administration, which did not happen the last time around, we would so something to remove that kind of anomaly under which a disabled young man has to pay this tax.

Mr. Healey: The hon. Gentleman's Government did not do so last time.

Mr. Nott: We most certainly tried last year. If the Chancellor is going to remedy the problem—and he has the power to do so—perhaps he will say so in his winding-up speech. But we debated this matter last year and the Chancellor opposed the minor amendment we put down to deal with this situation.
The hon. Member for Ince spoke of how the 25 per cent. rate of VAT had accelerated the closure of a television factory in his constituency which employed 1,350 workers and he wondered why, now that the Chancellor of the Exchequer has halved the higher rate, he had not recognised his mistake fully and brought the rate back to 10 per cent.
Obviously we welcome the concessions on CTT and the raising of the limits on annuities for the self-employed, but, as my right hon. Friend the Member for Wanstead and Woodford (Mr. Jenkin) pointed out, the increase in earnings-related contribution limit to £4,900, which will cost the self-employed £104 a year for no extra benefit, will more than wipe out any reduction of tax achieved by courtesy of the TUC.
This whole area of the relationship between tax and benefits was admirably covered by my hon. Friends the Members for Wells (Mr. Boscawen) and Norfolk, North (Mr. Howell).
What is astonishing about this Budget is not that the Labour Government have been forced to abandon the principle of compensating pensioners for past price increases—we understand why they have had to abandon that principle, though I have with me a whole feast of ministerial statements about what the Government


intended—but that the Chancellor has grossly widened the poverty trap in his Budget. In an intervention in the speech by the Leader of the House today, the hon. Member for Newcastle-upon-Tyne, East (Mr. Thomas) made this point very clearly. According to the Child Poverty Action Group, the increase in FIS will probably ensnare another 25,000 people in the poverty trap. If they take home £2 or more, in most cases they will get less than before.
If the Chancellor's plans go through, a working married man with two children earning £40 a week will get an extra £1·58 a week while the man who is out of work will get an improvement of £3·88. In other words, in this Budget a man on £40 a week who is out of work, no doubt for reasons which are not his own fault, will get almost double the increase of a man in work. This widening of the poverty trap, as my hon. Friend's pointed out so clearly, will bring disaster to this country.
This brings me to pay policy and the central strategy of the Budget. I have always understood that if one were lucky enough to occupy a bijou residence in Downing Street, there were great temptations to pander to the self-importance of the TUC. As one sat there with one's predecessors scowling down from the walls and surrounded by the trappings of power, in the form of one's colleagues and sycophantic civil servants, one must long to pull a real lever. I am not referring to the Chancellor of the Duchy of Lancaster, the right hon. Member for Manchester, Central (Mr. Lever). I am referring to a lever that actually works.
There must be an almost irresistible urge to cast around for allies, for fixers, real men like Mr. Scanlon who, for all their protestations to the contrary, are the only real instrument for smothering the messy process of free collective bargaining and making the corporate State work.
The TUC is there for Ministers. It is the flat bottom of an inverted pyramid, the narrow base of which rests upon a small minority vote of the minority of working men in this country. Nevertheless, the TUC is there and—it being tangible—I can understand why the Government seek to use it. Not long ago

The Times used to advertise the lists of the season's engagements at which eligible young ladies were matched off with gorm-less men. The TUC has usurped this freedom, like many others. The pages of The Times are now filled with lists of the hectic round of dinner parties and engagements undertaken by the members of the TUC as they flit from one social event of the pay season to another.
This year the Chancellor has ratted on the TUC. He has put it on the spot, and the prima donnas of modern politics upon whom the spotlight shines—all glamour but little political responsibility—have had responsibility thrust upon them. It is not surprising that the first reaction of the TUC has been a nervous one. As the hon. Member for Bedwellty (Mr. Kinnock) said today, the whole approach is making assumptions on trade unions' power which they may simply not be able to deliver.
Indeed, The Times on 7th April carried a leader on this subject, and I suspect that that leader will live up to the high reputation of its predecessors by getting its predictions almost precisely wrong. It said:
this constitutional innovation"—
the leader writer was describing the Chancellor's trade-off—
must increase the authority and prestige of the TUC".
I very much doubt it. I suspect that it will make the TUC look ridiculous. That may be the Government's intention—I do not know—but if the TUC is to deliver the goods it will certainly have to negotiate a margin of safety for itself, and I do not doubt that the Chancellor will give away more to the TUC than he would have needed to give away to working people. I hope that the Chancellor will not be deluded by the supreme danger of this approach. He has had a good weekend Press, and no doubt that will make him very cocky. Apart from the constitutional improprieties—I do not wish to touch on them—the Chancellor is taking major risks and the omens are not promising.
The hon. Member for Luton, West (Mr. Sedgemore) described the Budget as a bungled piece of mismanaged capitalism. That would not be my description, but I agree with much of what the hon. Gentleman said, as I do with the arguments put


forward by my right hon. Friend the Member for Brighton, Pavilion (Mr. Amery).
Because the Chancellor's strategy is seemingly dependent on a promise from the TUC, every statement against the norm by a union leader will be studied with concern, not just in the gilt-edged market but in New York, Zurich, Jeddah, Lagos and Hong Kong, and this period of instability will last until July. As the Leader of the House said, the debate will continue in the country for a long time, and each day those who hold sterling balances will be able to read headlines such as that in The Times today:
Mr. Jack Jones rejects 3 per cent. limit on pay rises".
I confess to having lost track of the size of sterling balances—I suspect that the Chancellor has as well—because they change as we sit here in the House, but our reserves are minuscule beside the potential flows. We are not far off having to borrow on the most humiliating conditions. Hon. Members on the Government Benches seem to be blissfully unaware just how close we are to a visit from the brokers' men of the IMF.
Maybe the more sensible union leaders will understand the problem and be circumspect. But what happens then? They are being asked not just to promise that figure but to put their weight behind it and to deliver it, not at the beginning of the pay round but at the end. I do not see how members of the TUC General Council are going to prove their virility as negotiators to their own members unless they show the wider world that they have wrung concessions from the Chancellor. All round the world, in the salubrious climes where bankers are wont to have their being, the bankers will be watching. They will not just watch through many months of negotiation between the Chancellor and the TUC. They will also be watching what is going on in British industry to an even greater extent, and the jolly old goings-on in British Leyland will have an even greater spotlight than up to now.
The Government will have to grasp this nettle. The British Leyland situation is what the Leader of the House described as a "striking" example of the difficulty of making a pay policy work. How right he was.
It is a major disadvantage of British economic management that the Economist and the Financial Times, good publications as they are, are read in every banking parlour in the world. The Financial Times is on the desk of every bank in the country every morning. If 3,000 men go on strike in Wisconsin, it merits perhaps some headlines in the Milwaukee Gazette, but the news does not travel all round the world. But if 10 men have an extended tea break in Wolverhampton, the Shahanshah of Iran, His Imperial Highness, His Majesty the King of Kings, has kittens in the morning. That is the problem with the circulation of the British Press.
It is still not clear at the end of this debate what happens if 4 per cent. replaces 3 per cent. What happens if there is to be a 4 per cent. norm instead of 3 per cent.? Presumably it is intended that the tax allowances are adjusted downwards. The Red Book will be torn up and we shall start all over again. Last week, I asked the then Paymaster-General about this and he replied that the Chancellor
… will, as ever, stand ready to take any measures which the situation requires.
But in practice, of course, the situation will be much worse if the world thinks that the Chancellor has been forced to 5 per cent. than if he had chosen it and stuck to it in the first place. The then Paymaster-General went on to say:
I emphasise that 3 per cent. is the highest which can be conceded if we are to be able to rely on meetng our inflation target."—[Official Report, 7th April 1976; Vol. 909, c. 407.]
The next day, the Treasury rushed out a statement saying that the proposal was infinitely adjustable in almost every direction one would care to choose.
I suspect that the eventual victims of this negotiating process will be public expenditure on the one hand and the Price Code on the other. It is impossible to imagine negotiations with the TUC to agree a 3 per cent. norm without something damaging coming out of it. It will be either more subsidies or failure to relax the Price Code, probably both, and so the basic structural weakness of our economy will be intensified, more resources will be channelled into the public sector, and the wealth-creating private


sector, whose profits have already fallen to zero, will be further clobbered.
We are accustomed to, if not happy with, the Public Expenditure White Paper, which tells us all we want to know, and more, about public expenditure, but nothing about how it is to be financed. Hitherto, we waited for the Financial Statement, which corrected all the figures in the Public Expenditure White Paper and then gave us provisional forecasts of Government revenue for the current year. Now it seems that there is to be almost no point during the financial year when Parliament will be able to say with any certainty how the Government intend to close the circle of expenditure, revenue and borrowing. The domestic and international markets are going to be in a continual state of uncertainty while this process goes on.
Contrary to what the hon. Member for Luton, West said, I do not believe that the Treasury mandarins advised this course. I think that it was a political decision and I think that the Chancellor in the end will regret—and will certainly be wholly responsible for—the decision that he has taken to negotiate in the open in this way. The Government will no doubt win their vote tonight and the Chancellor will not be called upon to abuse his colleagues. He is a ready learner and I know that he has learned some lessons from his language the other night in the public expenditure debate.
The Prime Minister—I must say that it is a great privilege to have him here for so much of this debate, and I mean that genuinely—at the time he was Chancellor used to rush up to Nuffield College, Cowley, and get lessons in economics and have books sent in to him in an attempt to understand the subject. He would have been a much better Chancellor if he had had no understanding of economics at all.
I intercepted in the Treasury the other day a document on the way to the Chancellor and I was interested to know what it was. It was a book on etiquette by Emily Post, the definitive book on how to behave. A marked page on language was headed " Phrases Avoided in Good Society." It said:
It is difficult to understand why well-bred people avoid certain words and expressions.

people of position are people of position the world over and by their speech are most readily known. A showgirl may be lovely to look at as she stands in a seemingly unstudied position and in perfect clothes, but let her say, 'My Gawd', and where is her loveliness then?
That was exactly the position with the Chancellor when he let himself go the other night.
My right hon. Friend the Member for Knutsford (Mr. Davies), in an outstanding contribution, pointed out the critical situation of the size of the borrowing requirement. My hon. Friend the Member for Blaby (Mr. Lawson), in an excellent speech today, and my hon. Friend the Member for Horsham and Crawley (Mr. Hordern) the other day, spoke on this subject too. In fact, the borrowing requirement is 10 per cent. higher than the outturn last year and 30 per cent. higher than last year's estimate.
We should like the Chancellor to answer the point of my hon. Friend the Member for Blaby. He made the charge that the Treasury had sharply reduced the non-public sector financial deficit items in order to get below £12 billion. I have been studying the Financial Statement since my hon. Friend spoke and what he said looks remarkably true. Perhaps the Chancellor would confirm that the items on pages 14 and 15 of the Red Book have not been sharply reduced from any previous year in order to get his borrowing requirement forecast below 12 per cent. If the right hon. Gentleman confirms that, I am sure that we shall accept that as his undertaking.
To the whole world, of course, Government expenditure is just out of control. We understand that the Chancellor cannot do anything about it. His party will not let him touch it, so the Government have no option but to attempt a savage reduction in living standards, and they are trying to use the TUC as their instrument. They are hitting the lower income groups the hardest, widening the poverty trap and probably now undermining savings, making it even harder to finance their borrowing requirement next year. The point of interest is whether the Government in the end will take the Sri Lanka route or the Argentine route.
I hope that the Prime Minister has read the Cambridge Economic Bulletin which he dismissed with a quip at his first Question Time the other day. I think he said that the authors were not living


in a real world. I wish they were not. It may be that the authors of that Bulletin are a little potty, but they are not in the advanced stage of lunacy of the National Executive of the Labour Party. I do not think that one has to advocate import controls to see the dreadful inevitability of what is in the pages of the Cambridge Economic Bulletin unless something firm and decisive is done to arrest this country's economic decline. After all, the diagnosis in that Cambridge paper is not much different from the Report of the Expenditure Committee of the House of Commons which was signed by Members on both sides and which rightly ridiculed the targets in the White Paper.
"The reality is alarming", was the comment made by one Government supporter today, and I agree. Sterling has already declined 10 per cent. since the Cambridge Economic Bulletin was written, and in fact the only alternative suggested, which no one in this House, in his right mind, would wish to see—import controls—was a 40 per cent. devaluation. Sterling has fallen 10 per cent. since that Report was written, and since the Budget the exchange market has shuddered and continues to shudder.
The Leader of the House said today that the more Leftish Governments had normally been thrown out of power through inflation—certainly more often through inflation than any other cause. Yet this morning we read in our newspapers that tonight the Home Policy Committee of the Labour Party was meeting. I mention it. It may not be a vitally important Committee, but it is certainly more important that the Bow Group to which the Chancellor of the Exchequer devoted the whole of his speech on public expenditure. It is in fact a major Committee of the Labour Party Executive, and we read this morning that guidelines for a new social contract between the Labour Party and the trade unions were to go before that Committee tonight. Evidently this document supports more food subsidies, a more progressive income tax and additional expenditure of £3,000 million.
The leaders of our nation are expected to waste their time, in the midst of a crisis for our country, listening to this drivel. It is almost unbelievable. The Chancellor of the Exchequer reduced

VAT from 10 per cent. to 8 per cent. just before the last General Election, cooked the RPI and made the boast during the election that inflation was running at 8·4 per cent. If he gets agreement on a percentage norm which allows him to reduce tax allowances retrospective to 5th April of this year, every wage packet in the country will contain a bonus in the summer or autumn of up to £20. That is looming up as the Chancellor's next little electoral trick.
If the summer is warm, inflation just temporarily abates a little and the Prime Minister is still basking in his honeymoon, why should not the Chancellor of the Exchequer use the bonus—that extra chunk in the pay packets in the summer and autumn of this year—just as he used 8·4 per cent. last time, to fool the British people?
During his recent public engagement in his constituency, the Prime Minister spoke of a Welsh legend, which we read with great interest, whereby a king of ancient Britain on a punitive expedition against the Irish lay prostrate across the River Shannon to provide a bridge for his troops to cross—

The Prime Minister (Mr. James Callaghan): I did not go into all that.

Mr. Nott: I know, but this was the background briefing which the Press picked up very well.
If the summer is hot, the pay packets contain an unexpected £20, inflation is a little lower and the Prime Minister is still basking on his honeymoon, I suggest to him that he should cut and run. Let the Labour movement clamber on his back and get ashore before the bridge collapses, because it will not stand up under this strain for long.

9.29 p.m.

The Chancellor of the Exchequer (Mr. Denis Healey): This has been an interesting and, as the hon. Member for St. Ives (Mr. Nott) demonstrated, at times witty and irrelevant debate. We have heard his speech many times before, and it is not surprising that he polishes it a little more each time that he makes it.
We had three excellent maiden speeches. The hon. Member for Wirral (Mr. Hunt) showed his deep concern for unemployment and was not ashamed to say how much he welcomed the measures


to deal with it which I announced in this Budget. The hon. Member for Carshalton (Mr. Forman) made a somewhat more controversial maiden speech, but I suppose that that befits the Caesarean origins of his constituency, as he described them. My hon. Friend the Member for Coventry, North-West (Mr. Robinson) gave the House a most impressive argument for industrial democracy and it deserves special attention, coming, as it does, from a man who, despite his youth, has a record of outstanding success as an industrial manager in Britain and abroad. This record clearly excited awe and envy on the Opposition Front Bench, which cannot match it.
I pay particular tribute to the speech of my hon. Friend the Member for Huddersfield, West (Mr. Lomas), who returned to the House after a long absence and showed us how much we have missed during his illness.
The right hon. Member for Leeds, North-East (Sir K. Joseph) delivered himself of another instalment of his intellectual Odyssey. The House has come to watch these exhibitions of tortured self-castigation with the same sort of embarrassed fascination as that with which one watches a fakir on a bed of nails. I apologise for making fun of his disarming honesty, but it is not without importance when a Front Bench Opposition spokesman admits that inflation in the last two years was caused largely by the profligacy of the Government of which he was a member. I do not believe that I should be criticised for pointing out that important fact.
I do not want to discourage the right hon. Member in his exploration of modern economic theories, but he should ask himself whether the totality of economic wisdom must lie with one or the other of the two economic theories at present fashionable with British City journalists. He should ask himself whether either monetarism or what he calls neo-Keynesism is likely to have a monopoly of economic wisdom. Both offer valuable insights into our current predicament. But in laying such stress as he did on the size of the public sector deficit as the root or the sole cause of our present troubles, in suggesting that it is directly and wholly responsible for

unemployment and inflation, he should consider three undeniable facts.
The first fact is that the United States has a much lower public sector deficit than Britain, yet has much higher unemployment. On the right hon. Gentleman's argument, its unemployment should be lower than ours. The second fact is that Germany has a higher public sector deficit but much lower inflation than ours. On his argument, the German public sector deficit should make inflation higher there. The third fact is that between 1969 and 1971 Britain had an overall public sector surplus, largely due to the efforts of my right hen. Friend the Member for Birmingham, Stechford (Mr. Jenkins), yet during that period there was a steady acceleration in the rise of average earnings from 6½ per cent.—a figure at which it had been steady for five years—to 10½ per cent. On the right hon. Gentleman's argument, there should have been a fall in wages.
I ask the right hon. Gentleman to consider his theories against these facts because he spends all his time in these debates—and so, at least, did three of his right hon. Friends who spoke in the last few days—in claiming that the size of the public sector borrowing requirement is totally inconsistent with adequate control of the money supply. They all argued this in exactly the same terms last year, and their argument would have been more impressive had it been proved right. But none of the disasters they predicted came about, nor will they this year.
Perhaps I can deal with the two points raised by the hon. Member for Blaby (Mr. Lawson) to which the hon. Member for St. Ives referred. The hon. Member for Blaby, with his usual felicitous choice of phrase, said that we were cooking the books to reduce the public sector borrowing requirement, and he drew attention to the two items in Table 5 of the Red Book.
First, the hon. Gentleman said that cash expenditure on company securities was, as forecast for 1976–77 at £125 million, substantially lower than the 1975–76 outturn of £481 million. That is true. But the answer should be obvious enough to him. It is that in the current year we had special factors, such as the problems of British Leyland and Alfred Herbert, and we had to increase the


capital base of Rolls-Royce, and those are not expected to recur next year.
Secondly, the hon. Gentleman referred to miscellaneous capital transactions. Here the drain on revenue for 1976–77 of £258 million is again below the 1975–76 figure. But the answer to that is that this item was abnormally high last year because of an exceptionally high level of local authority borrowing, and we are expecting that to return to more normal levels this year.
The hon. Member may well not be satisfied with the explanations that I have given, but they are the explanations that I believe to be true, so I hope that he will at least withdraw the rather silly remark that we were cooking the books in putting those figures in the Red Book.
As I made clear in my Budget Statement last week, it certainly will be necessary to reduce the public sector's demand on resources as recovery in the private sector proceeds. However, as I have argued again and again in the last year, to make large reductions in the public sector borrowing requirement immediately would simply be a prescription for a very large increase in unemployment. The right hon. and learned Member for Surrey. East (Sir G. Howe) finally admitted that in a speech in Surbiton not so long ago. As my right hon. Friend the then Paymaster-General—who has now, I am glad to say, been translated to a higher place, though not to another place—said on Wednesday, it would mean digging a hole that we know will not be filled.
I said last week that I expect monetary growth to be rather higher in the year ahead than it was in the last two years, but, of course, money GDP will be substantially higher, so the money supply should remain at a rate that is consistent with my overall strategy. As I said last week, if I find that it looks like not being so consistent, I shall take any action, monetary or other, which may be necessary to correct it.
However, where the right hon. Member for Leeds, North-East so much disappointed both his hon. Friends and us on the Government side of the House was that at the end of a long lecture about what he claimed were the implications of an incomes policy, he was totally obscure about his own position on incomes policy. All that he told us was that what he had said was not an argument either for or

against an incomes policy. However, incomes policy is a matter of some importance whether one is for it or against it. The Opposition have a duty to tell us where they stand.
The right hon. Gentleman was coy and modest enough, but not so those of his hon. Friends who spoke from the Front Bench in the debate. The hon. Member for Blaby was quite open, as he always has been, in his total rejection of incomes policy as being positively damaging to the management of the economy. The hon. Member for Cirencester and Tewkesbury (Mr. Ridley), in so far as we could detect any thread of meaning in the speech that he made the other day, seemed to take the same view. Incidentally, when the hon. Member for Blaby was speaking, I noticed the right hon. Gentleman—as so often and so charmingly—nodding vigorously in agreement with him in every attack that he made on incomes policy.
The hon. Member for St. Ives spent much of his speech attacking the very concept of an incomes policy, root and branch. I did not find it perhaps quite so attractive as some hon. Members that the hon. Member should take such pleasure in fouling the nest in which he lived so comfortably up to February 1974. I do not mind his fouling his own late nest and talking down the Heath Government of which he was a member—I apologise to the right hon. Member for Sidcup (Mr. Heath)—but I must say that I found it profoundly unattractive to find the hon. Gentleman talking down Britain to the extent and in the detail that he did in those disgraceful passages in his speech tonight.
To return to the right hon. Member for Leeds, North-East, at the end of his speech he at least enlightened us a little about his own views on the economy. He told us—I quote his words—that we must redress a century of Socialist error, a century initiated, I suppose, by that great Bolshevik, Disraeli and carried forward by a mixed bag of Trotskyists and Maoists, such as Campbell-Bannerman, Bonar Law, Chamberlain and Baldwin, to name but a few.
Of course, when the right hon. Gentleman came to his moving and rather baroque peroration, he made it clear that his real objective is to return to the world of Mr. Gradgrind, to the full horror of


early Victorian industrialism, a horror from which, I am glad to say, wiser and more humane leaders of his own party helped to rescue us during the past 100 years. While as rhetoric what the right hon. Gentleman said at the end of his speech may, I suppose, serve to rally some of his party's extremists, those of us who were sitting here at the time could see how much it appalled others of his hon. Friends on the Back Benches.
We listened today, as we have listened so often in the past, to find out how the right hon. Gentleman proposes to turn this early Victorian rhetoric into economic policy—to learn where the great cuts in public expenditure will come, and to hear how much extra unemployment, and for how long, will be engendered thereby. But, of course, answer came there none. There was a vague suggestion that some of the money would go to reduce the PSBR and perhaps some to reduce the burden of taxation, but there was no indication whatever of where the right hon. Gentleman would put the balance.
It is a fact that we have a major problem of adjustment in our economy. It is a problem to which many hon. Members on both sides have referred again and again in the debate. In part, it is a problem inherited by this Government from their Conservative predecessors—an economy gravely distorted, with a large and growing deficit on the balance of payments and a large and growing public sector deficit as well—but on top of that the increase in the price of oil and other commodities cut our real national income in 1974 by nearly 5 per cent.
To have attempted to adjust immediately to that double blow at a time when the world was already moving into recession would have meant unemployment in Britain far above the levels that we have had to endure in recent months. But now that the world recovery is under way, we must make that adjustment, painful though it may be.
My hon. Friend the Member for Tottenham (Mr. Atkinson) today gave some figures about the movement of real take-home pay for a particular individual in particular circumstances, but I think that the House will get a better idea of what has been happening and what is needed

if we look at the movement of real take-home pay for the working population as a whole. In spite of the impact of the oil price increase on our real national income, real take-home pay rose sharply at the end of 1974, and that was a rise which simply could not be sustained.
The big fall came in the second quarter of 1975, before the £6 limit took effect. There was then a drop of about 5 per cent. But since that big drop there has been relatively little net change. Although the prospect for 1977 is for a further small fall, perhaps between 1 per cent and 2 per cent.—and less, under my proposals, for relating the low pay limit to tax relief than under the higher pay limit without tax reliefs, to which I referred to my Budget speech—the actual outcome will depend very much on the performance of the economy.
I think that my hon. Friend should understand, however, that since 1974 there has been a great increase—about 15 per cent.—in the real value of old-age pensions. That improvement has to be paid for by the working population, and that improvement has itself meant that real take-home pay is now about 2 per cent. lower than it would have been if pensioners' living standards had been static. I believe that all my right hon. and hon. Friends think it right that the working population should make this sacrifice to support the growing proportion of the population that is retired, but, in so doing, they must accept that it inevitably has a consequence on the movement of take-home pay for those who are in work.
As I made clear last week, the fall in real take-home pay is part of the price the nation has to pay for getting unemployment down, because the number of people out of a job will depend largely on the earnings of those in work.
I now turn to the issue which has dominated much of the debate—

Mr. Nicholas Ridley: The right hon. Gentleman has just said that wages went down by 5 per cent. at the beginning of 1975. How did that result in a massive increase in unemployment?

Mr. Healey: That did not result in a massive increase in unemployment. The increase was building up, as I explained


in my Budget speech, as a result of an enormous fall in world trade which led to a heavy fall in British exports—in fact a collapse in export demand. It was also due partly because of a heavy fall in industrial stocks.
I shall now turn to the issue that has dominated much of the debate—my proposal for relating reliefs in personal taxation to the pay limit in the next wage round. My right hon. Friend the Leader of the House made a devastating reply to those who argue that my approach is, in some cases, unconstitutional. I am glad to see that as the week has worn on this argument has been used less and less, even by the Opposition Front Bench. At the end of the day, when I have decided on the appropriate changes in personal taxation, they will be put to the House, which will be perfectly free, as always, to accept or reject them.
It has also been argued that the Government have no right to discuss these matters with the TUC before taking a final decision. In this case the Archangel Michael was joined by St. Peter because the right hon. Member for Worcester (Mr. Walker) crushingly answered the complaint made by his Front Bench. He said that the Government are acting exactly the same as the Government led by his right hon. Friend the Member for Sidcup.
The likely level of wage settlements is always a major element in determining the likely rate of inflation. Any Government worth their salt will try to ensure that those who try to negotiate wage settlements do so in full knowledge of the economic needs and the likely effect on jobs and taxation of levels of earnings. The only difference between the present Government and the Conservative Government is that in the past Governments have carried out the necessary consultations in private, without letting the whole nation know what is involved. This Government have taken the other course; they have stated frankly, in public, what they believe to be the right inflation target for the coming year and what wage increases there can be to achieve that. That is a more democratic and constitutional course. The last week has shown that the nation shares my view, but, as usual, the Conservative Front Bench have oscillated between the conditioned

reflex of instant opposition and a sort of feverish opportunism which seeks to exploit any momentary discontent. Yet the Opposition Front Bench hope, in the end, to share any credit there is for success by the Government.
As my right hon. Friend the Leader of the House reminded us, the right hon. and learned Member for Surrey, East said nine months ago that the £6 limit was abhorrent in any sense, but now he never misses a chance to tell us how he and his party support it. His Back Benchers have been more honest. The overwhelming majority of hon. Members who have spoken from either side have endorsed the Government's approach to the problem and have wished it well. That was as true of the majority of Conservative speakers as of my hon. Friends. I have no doubt that this year, like last year, the Conservative Front Bench will come into line with majority opinion as soon as it is clear that the Government's policy will succeed.
But what is more impressive to me even than the extraordinary degree of consensus in the House about this approach is the growing evidence that the great majority of people outside, including the great majority of trade unionists, understand the Government's approach and believe that it offers the best answer to the nation's need. Last week, many people were arguing that the complexity of my proposals would in itself rule them out, but once again they have been proved wrong about the common sense of the British people and the ability of ordinary men and women to understand the facts of their own economic lives. Ordinary people know that what matters is how much money they receive after the Inland Revenue has taken its share, and what that money will buy in the shops. They know that it is crazy to repeat the sort of experience we had last year, when earnings went up by 29 per cent. but living standards hardly rose at all. Their trade union representatives know it too.
As Mr. Jack Jones wrote in a notable article last weekend—[interruption.]—Conservative Members must decide whether they are engaged in a honeymoon courtship of the trade unions or are reverting to type and insulting them


in every aspect of their behaviour. Mr. Jones said:
We are concerned over jobs and the value of our pay, not the number of notes in the pay packet.
I believe that in that he spoke for all his members.
I do not deny that there are many difficult problems still to be discussed and overcome before the trade union movement can reach agreement on a policy for incomes in the coming round which will meet the nation's needs. But we are already at one about the objective. The Government and the TUC agree 100 per cent. on the need to achieve a pay policy that will reduce inflation still further in the coming year—to well under 10 per cent. to quote the TUC Economic Survey.
I agree with Mr. Len Murray when he said the other day—[Interruption.]—I only wish that trade unionists could hear the sneers of Conservative Members and throw back in their teeth the sort of flabby courtship of the unions by the right hon. Lady and her right hon. Friend the Member for Lowestoft (Mr. Prior) in recent weeks. Mr. Murray said:
I believe that we will get there in the end, and by 'we' I mean that the TUC will find a formula that will be acceptable to the unions and the membership.
I have stated again and again in recent months that what the Government want this year is what they got last year, an agreement worked out by the trade unions, for the trade unions, in full knowledge and acceptance of the unions' needs—in other words, a voluntary agreement freely entered into on both sides.
I am not trying to dictate a policy, but it is my duty as Chancellor to make clear what I think would be best for Britain, best for jobs, best for living standards, and best for the welfare of the weaker members of our society.
I said in my speech last Tuesday, and I say again tonight, that what we need is a pay limit that will enable us to get our inflation down at least to the level of our main competitors. I do not believe we can rely on achieving this with a pay limit that is beyond the area of 3 per cent. I have shown how the combination of lower inflation and tax

cuts will guarantee that the majority of working families will be better off with a lower pay limit than with a higher one. Moreover, the 3 per cent. limit with the tax reliefs would make pensions worth more during 1977 than a higher limit, because of lower price increases. Most important of all, the whole country would be better off. Our industry would be able to invest more, we would be able to sell more both at home and abroad, and unemployment would fall faster. That is why I hope and believe that in the end those who do not yet accept the advantages of my proposal will come to accept them.
I well understand the difficulties that may arise with so low a limit after a year in which all workers have been restricted to a flat £6 a week increase. If, in the end, the trade unions feel that they cannot make a limit as low as I have suggested stick for 12 months on the shop floor, we may have to be satisfied with second best.

Mr. Peter Walker: Surrender within a week!

Mr. Healey: As my right hon. Friend the Leader of the House stressed over and over again, our overriding purpose is to achieve a new voluntary agreement with the trade unions which will carry forward the progress we are now making in the fight against inflation. To fail in that overriding purpose would be to set all our achievements at risk and to rule out any chance of reducing unemployment.
If we have to settle for second best that will not relieve me of my responsibility of helping to guide the economy by managing demand. I shall not be able to run the economy at a higher level of demand if incomes rise more than I believe they should. On the contrary, a higher pay limit must mean that I have less room for tax relief.
The conditional tax reliefs that I proposed in my Budget speech require a pay limit of about 3 per cent. if the economy is to sustain them. I hope that in reaching their decision the trade unions will take into account what I have already done in the Budget to meet their aspirations—namely, an improvement in pensions larger than is needed to fulfil our manifesto commitment, the increase in short-term benefits and family income


supplement, the cut in the 25 per cent. rate of VAT, the new measures to promote investment, the doubling of the temporary employment subsidy, the new action to deal with tax evasion and avoidance through fringe benefits, the tax help for widows and the pensioner with extra means. The additional package of tax cuts, which are conditional on the pay limit, will give further help to the poor and, through its effect on prices, to all who are not working, such as pensioners, the sick, the disabled and the unemployed.
That is one way in which we can approach the solution of our nation's problems, and in the real world there is only one other approach. I am sorry to say that it is not the approach put forward by my hon. Friend the Member for Luton, West (Mr. Sedgemore). My hon. Friend made an excellent and persuasive speech but, if I may say so, I think that my hon. Friend the Member for Nuneaton (Mr Huckfield) answered it with total conviction and most convincingly. The only real answer to the policy that I have put forward is that put forward by the right hon. Member for Leeds, North-East, namely, the policy of Mr. Grad-grind. That is a policy that is certain to lead to prolonged and massive unemployment and to a dreary repetition of the confrontation with the trade unions which led the last Government to disaster.
We offer a better way—a way of cooperation with the trade union movement that is based on common principles and common objectives. By accepting the hard facts that such a policy implies, I believe that the trade union movement will do yet another great service to the nation. On those grounds, I ask the House to endorse the proposals that I set out in my Budget speech last week.

Question put:—

The House divided: Ayes 295, Noes. 274.

[For Division List No. 108 see col. 1105.]

Questions accordingly agreed to.

Resolved,
That it is expedient to amend the law with respect to the National Debt and the public revenue and to make further provision in connection with finance; but, without prejudice to any authorisation by virtue of any resolution

relating to value added tax, this Resolution does not extend to the making of amendments with respect to that tax so as to provide—

(a) for zero-rating or exempting any supply;
(b) for refunding any amount of tax;
(c) for reducing the rate at which tax is for the time being chargeable on any supply or importation otherwise than by reducing that rate in relation to all supplies and importations on which tax is for the time being chargeable at that rate; or
(d) for any relief other than relief applicable to goods of whatever description or services of whatever description.

Mr. Speaker: I am now required, under Standing Order No. 94(2), to put successively without further debate the Question on each of the Ways and Means motions numbered 2 to 35 and on the motion on Procedure (Future Taxation) all of which the Finance Bill is to be brought in. I propose, instead of reading out each motion in extenso, to follow the procedure used in recent years—that is to say, I will first state the title of a motion and then put simply the Question "That the motion be agreed to".

2. SPIRITS

Motion made, and Question,
That as from 7th April 1976 the rates of duty specified in section 9 of the Finance (No. 2) Act 1975 shall be increased from £22·0900 and £22·1650 per proof gallon to £24·6300 and £24·7050 per proof gallon respectively.
And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.—[Mr. Healey.]
put forthwith pursuant to Standing Order No. 94 (Ways and Means Motions).

The House divided: Ayes 295, Noes. 19.

[For Division List No. 109 see col. 1109.]

Question accordingly agreed to.

3. BEER

Motion made, and Question,
That as from 7th April 1976 the rates of duty specified in section 10d) of the Finance (No. 2) Act 1975 shall be increased—

(a) from £13·6800 for every 36 gallons to £15·8400 for every 36 gallons;
(b) from £0·4560 for each additional degree of original gravity exceeding 1,030 degrees to £0·5280 for each such additional degree.




And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.—[Mr. Healey.]

That as from 7th April 1976 the rates of duty under section 14 of the Finance (No. 2) Act 1975 shall be as follows:—


Description of wine (in strengths measured by reference to the following percentages of alcohol by volume at a temperature of 20° C.)
Rates of duty (per gallon)







£


Wine of an alcoholic strength—



not exceeding 15%
…
…
…
…
2·9550


exceeding 15 but not exceeding 18%
…
…
…
…
3·4100


exceeding 18 but not exceeding 22%
…
…
…
…
4·0150


exceeding 22%
…
…
…
…
4·150 plus







£0·4300 for every 1% or part of 1% in excess of 22%;







each of the above rates of duty being, in the case of sparkling wine, increased by £0·6500 per gallon.

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.—[Mr. Healey.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means Motions), and agreed to.

That as from 7th April 1976 the rates of duty under section 15 of the Finance (No. 2) Act 1975 shall be as follows:


Description of wine (in strengths measured by reference to the following percentages of alcohol by volume at a temperature of 20° C.)
Rates of duty (per gallon)







£


Made-wine of an alcoholic strength—



not exceeding 10%
…
…
…
…
1·9200


exceeding 10 but not exceeding 15%
…
…
…
…
2·8750


exceeding 15 but not exceeding 18%
…
…
…
…
3·1600


exceeding 18%
…
…
…
…
3·1600 plus







£0·4300 for every 1% or part of 1% in excess of 18%;







each of the above rates of duty being, in the case of sparkling wine, increased by £0·3000 per gallon.

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.—[Mr. Healey.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means Motions), and agreed to.

6. HYDROCARBON OIL ETC.

Motion made, and Question,
That as from 6 o'clock in the evening of 9th April 1976 the rate of duty specified in section 11 of the Finance (No. 2) Act

put forthwith pursuant to Standing Order No. 94 (Ways and Means Motions), and agreed to.

4. WINE

Motion made, and Question,

5. MADE-WINE

Motion made, and Question,
1975 shall be increased from £0·2250 a gallon to £0·3000 a gallon.
And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.—[Mr. Healey.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means Motions).

The House divided: Ayes 284, Noes 22.

[For Division List No. 110 see col. 1111.]

Question accordingly agreed to.

7. CIDER

Motion made, and Question,
That as from 6th September 1976 there shall be charged on cider imported into or made in the United Kingdom a duty of excise at the rate of £0·22 a gallon.
In this resolution "cider" means cider (or perry) of a strength less than 8·7 per cent. of

That as from 10th May 1976 there shall be charged on tobacco products imported into or manufactured in the United Kingdom a duty of excise at the rates shown in the following Table—


TABLE


1. Cigarettes
…
…
…
An amount equal to 20 per cent. of the retail price ascertained in such manner as Parliament may determine


2. Cigars
…
…
…
£2·765 per pound


3. Hand-rolling tobacco
…
…
…
£2·400 per pound


4. Other smoking tobacco and chewing tobacco



£1·550 per pound


and that provision may be made for varying those rates.
In the Table above "hand-roiling tobacco" means tobacco—

(a) which is sold or advertised by the importer or manufacturer as suitable for making into cigarettes; or
(b) of which more than 25 per cent. by weight of the tobacco particles have a width of less than 0·6 mm.;


and in this resolution " tobacco products " means any of the products mentioned in that Table which are manufactured wholly or partly from tobacco or any substance used as a substitute for tobacco but does not include products commonly known as herbal cigarettes or herbal smoking mixtures.— [Mr. Healey.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means Motions), and agreed to.

9. SURCHARGES AND REBATES IN RESPECT OF REVENUE DUTIES

Motion made, and Question,
That the period after which orders under section 9 of the Finance Act 1961 may not be made or continue in force shall be extended until the end of August 1977.—[Mr. Healey.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means Motions), and agreed to.

10. VALUE ADDED TAX (REDUCTION OF HIGHER RATE)

Motion made, and Question,
That as from 12th April 1976 the higher rate of value added tax referred to in section 17(1) of the Finance (No. 2) Act 1975 shall be reduced from 25 per cent. to 12½ per cent.
But this Resolution shall not authorise the making of amendments that would make value

alcohol by volume (at a temperature of 20°C) obtained from the fermentation of apple or pear juice without the addition at any time of any alcoholic liquor or of any liquor or substance which communicates colour or flavour other than such as the Commissioners of Customs and Excise may allow as appearing to them to be necessary to make cider (or perry).—[Mr. Healey.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means Motions), and agreed to.

8. TOBACCO PRODUCTS

Motion made, and Question,
added tax chargeable at more than one rate higher than the standard rate.
And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.—[Mr. Healey.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means Motions), and agreed to.

11. VALUE ADDED TAX (MINOR AMENDMENTS)

Motion made, and Question,
That provision may be made—

(a) for excluding from tax that may be deducted under section 3(1) of the Finance Act 1972 or refunded under section 15 or 15A of that Act any tax that has been repaid or would be repayable if it had been paid;
(b) for enabling regulations under section 3(4) of that Act to dispense with the adjustment of provisional attributions of input tax;
(c) for amending paragraph 4 of Schdule 3 to that Act;


(d) with respect to the value of imported goods and of the supply of goods in a warehouse where an order is in force under section 9 of the Finance Act 1961.—[Mr. Healey.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means Motions), and agreed to.

12. VEHICLES EXCISE DUTY (SPECIAL REQUESTS FOR REGISTRATIO MARKS)

Motion made, and Question,
That provision may be made for the imposition, by regulations under the Vehicles (Excise) Act 1971 and the Vehicles (Excise) Act (Northern Ireland) 1972, of charges in connection with any special request for the assignment to a vehicle of a particular registration mark.—[Mr. Healey.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means Motions), and agreed to.

13. VEHICLES EXCISE DUTY (DISABLED PERSONS)

Motion made, and Question,
That a vehicle shall not be exempt from vehicles excise duty by virtue of section 7 of the Finance Act 1971 or section 7(2A) of the Vehicles (Excise) Act (Northern Ireland) 1972 for any period after 6th April 1976 for which the person in whose name the vehicle is registered is entitled to a mobility allowance:
Provided that where a person—

(a) has before that date obtained, in pursuance of regulations made under the Vehicles (Excise) Act 1971 or the said Act of 1972, a document in the form of a licence in respect of a vehicle exempt as aforesaid; or
(b) has since the beginning of 1976 and before that date applied for the certificate required by the regulations for obtaining such a document,

the vehicle shall not cease to be exempt by virtue of the foregoing provisions before the expiration of the period of validity of the document obtained by him before that date or, as the case may be, of the first such document obtained by him after that date by virtue of the certificate.
And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968. —[Mr. Healey.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means Motions), and agreed to.

14. INCOME TAX (CHARGE AND RATES FOR 1976–77)

Motion made, and Question,
That income tax for the year 1976–77 shall be charged at the basic rate of 35 per cent. and—

(a) in respect of so much of an individual's total income as exceeds £4,500 at such higher rates as are specified in the Table below; and
(b) in respect of so much of the investment income included in an individual's total income as exceeds £1,000 at the additional rates of 10 per cent. for the first £1,000 of the excess and 15 per cent. for the remainder;

except that, in the case of an individual who shows that at any time within that year, his age or that of his wife living with him was sixty-five years or more, income tax at the additional rate of 10 per cent. shall not be charged in respect of the first £500 of the excess mentioned in paragraph (b) above.

TABLE


Part of excess over £4,500
Higher rate


The first £500
40 per cent.


The next £1,000
45 per cent.


The next £1,000
50 per cent.


The next £1,000
55 per cent.


The next £2,000
60 per cent.


The next £2,000
65 per cent.


The next £3,000
70 per cent.


The next £5,000
75 per cent.


The remainder
83 per cent.


And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.—[Mr. Healey.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means Motions), and agreed to.

15. RELIEF FOR INTEREST (LIMIT FOR 1976–77)

Motion made, and Question,
That the limit imposed by paragraph 5 of Schedule 1 to the Finance Act 1974 shall, subject to any reduction to be made under that paragraph, be £25,000 for the year 1976–77.—[Mr. Healey.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means Motions), and agreed to.

16. INCOME TAX (ALTERATION OF PERSONAL RELIEFS)

Motion made, and Question,
That—
(1) In section 8(1A) and (IB) of the Income and Corporation Taxes Act 1970 for "£1,425", "£950" and "£3,000" there shall be substituted "£1,555", "£1,010" and "£3,250" respectively.
(2) In section 10(3) of that Act (children)—

(a) in paragraph (a) (child over 16) for "£305" there shall be substituted "£365";
(b) in paragraph (b) (child over 11 but not over 16) for "£275" there shall be substituted "£335";
(c) in paragraph (c) (child not over 11) for "£240" there shall be substituted "£300";

but this Resolution shall not require any change to be made in the amounts deductible or repayable under section 204 of the said Act of 1970 (pay as you earn) before 5th June 1976.
And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.—[Mr. Healey.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means Motions), and agreed to.

17. INCOME TAX (HUSBAND AND WIFE)

Motion made, and Question,
That—
(1) In section 37(1) of the Income and Corporation Taxes Act (aggregation of wife's income with husband's) for the words "so far as it is income for a year of assessment or part of a year of assessment during which she is a married woman living with her husband" there shall be substituted the words "so far as it is income for—

(a) a year of assessment; or
(b) any part of a year of assessment, being a part beginning with 6th April, during which she is a married woman living with her husband".


(2) In section 38(1) of that Act (option for separate assessment) after the words "any year of assessment" there shall be inserted the words "for which his income would include any of hers" and the proviso shall be omitted.
(3) In section 14 of that Act—

(a) in subsection (2) for the words "Subject to subsection (3) below" there

shall be substituted the words "Subject to subsections (3) and (4) below"; and
(b) after subsection (3) there shall be inserted—

"(4) A person to whom this section applies by virtue of subsection (1)(a) above shall not be entitled to relief under this section for a year of assessment during any part of which that person is married and living with his or her spouse unless the child in connection with which the relief is claimed is resident with that person during a part of the year in which that person is not married and living with his or her spouse.
(4) In section 19(7) of that Act (life insurance premium paid by wife to count as if paid by husband) after the word "Where" there shall be inserted the words "in any year of assessment for which her husband's income includes or, if there were any, would include any of hers".
(5) After section 21(1) of that Act (life insurance premium relief not to exceed one-sixth of a person's total income) there shall be inserted—
(1A) In relation to a year of assessment in which a woman is married and living with her husband but for which his income does not or, if there were any, would not include any of hers, subsection (1) above shall apply to each of them as if the maximum there specified were increased by an amount equal to the difference between—

(a) one-sixth of the other's total income; and
(b) the premiums or other sums in respect of which relief is given to the other."

(6) Where during any part of a year of assessment a husband and wife are living together but his income for that year does not or, if there were any, would not include any of hers, then, if either of them—

(a) would, if he or she had sufficient income for that year, be entitled to have any amount deducted from or set off against it under a provision to which this paragraph applies; and
(b) makes a claim in that behalf,

that amount or, as the case may be, so much of it as cannot be deducted from or set off against his or her own income for that year shall instead be deducted from and set off against the income for that year of the other spouse.
(7) Paragraph (6) above applies—

(a) in the case of the husband, to any provision of Chapter II of Part I of the income and Corporation Taxes Act 1970 (personal reliefs) and section 75 of the Finance Act 1972 (relief for payment of interest);
(b) in the case of the wife, to—

(i) any provision of that Chapter except sections 8(1)(b) and (1A)(b), 12, 13 and 14: and


(ii) the said section 75 so far as applicable to interest paid in the part of the year of assessment mentioned in paragraph (6) above.


(8) For the purposes of section 168 of the Income and Corporation Taxes Act 1970 and section 71 of the Capital Allowances Act 1968 (set-off of losses and capital allowances against general income) section 37(1)(b) of the said Act of 1970 shall have effect as if the words "being a part beginning with 6th April" were omitted.
And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968—[Mr. Healey.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means Motions), and agreed to.

18. TAXATION OF BENEFITS FROM EMPLOYMENT (INCOME TAX)

Motion made, and Question,
That charges to income tax may be imposed in respect of benefits of any description derived from a person's employment or his being a director of a body corporate.—[Mr. Healey.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means Motions), and agreed to.

19. TAXATION OF CASH VOUCHERS (INCOME TAX)

Motion made, and Question,
That charges to income tax may be imposed by provisions postponing the coming into operation of section 37 of the Finance (No. 2) Act 1975.—[Mr. Healey.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means Motions), and agreed to.

20. CORPORATION TAX (CHARGE AND RATE FOR FINANCIA YEAR 1975)

Motion made, and Question,
That corporation tax shall be charged for the financial year 1975 at the rate of 52 per cent.—[Mr. Healey.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means Motions), and agreed to.

21. ADVANCE CORPORATION TAX (RATE FOR FINANCIAL YEAR 1976)

Motion made, and Question,
That the rate of advance corporation tax for the financial year 1976 shall be thirty-five sixty-fifths.—[Mr. Healey.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means Motions), and agreed to.

22. CORPORATION TAX (SMALL COMPANIES)

Motion made, and Question,
That—

(a) the small companies rate for the financial year 1975 shall be 42 per cent.; and
(b) the fraction by which corporation tax charged on income is reduced under section 95(2) of the Finance Act 1972 shall for the financial year 1975 be three-twentieths.—([Mr. Healey.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means Motions), and agreed to.

23. CORPORATION TAX (AUTHORISED UNIT TRUSTS AND INVESTMEN TRUSTS)

Motion made, and Question,
That the fraction by which, under section 93(2) of the Finance Act 1972, chargeable gains are to be reduced before they are for the purposes of corporation tax included in the profits of an authorised unit trust or investment trust shall as from 1st April 1975 be sixty-nine one-hundred-and-fourths.—[Mr. Healey.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means Motions), and agreed to.

24. CAPITAL ALLOWANCES (INCOME TAX AND CORPORATION TAX)

Motion made, and Question,
That charges to income tax and corporation tax may be imposed by provisions about capital allowances, including provisions having retrospective effect.—[Mr. Healey.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means Motions), and agreed to.

25. CLOSE COMPANIES (CORPORATION TAX AND INCOME TAX)

Motion made, and Question,
That charges to corporation tax and income tax may be imposed by provisions relating to sections 286 and 287 of the Income and Corporation Taxes Act 1970.—[Mr. Healey.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means Motions), and agreed to

26. APPRECIATION IN VALUE OF TRADING STOCK (INCOME TAX AN CORPORATION TAX)

Motion made, and Question,
That provision may be made for the recovery in certain circumstances of relief under


new provisions in respect of increases in the value of trading stock and work in progress or under the provisions of section 18 of the Finance Act 1975 or Schedule 10 to the Finance (No. 2) Act 1975.—[Mr. Healey.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means Motions), and agreed to

27. DOUBLE TAXATION (IRELAND)

Motion made, and Question,
That charges to income and corporation tax may be imposed in connection with the implementation in 1976 of new arrangements with the Republic of Ireland for the avoidance of double taxation.—[Mr. Healey.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means Motions), and agreed to

28. FOREIGN INTEREST AND DIVIDENDS (INCOME TAX AND CORPORATION TAX)

Motion made, and Question,
That provision may be made to prevent receipts by non-residents of interest or dividends from outside the United Kingdom being excluded from trading income or profits so as to give rise to losses.—[Mr. Healey.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means Motions), and agreed to

29. FOREIGN UNDERLYING TAX ON COMPANY PROFITS (INCOME TAX AND CORPORATION TAX)

Motion made, and Question,
That provision may be made to restrict relief for foreign tax on profits underlying dividends.—[Mr. Healey.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means Motions), and agreed to

30. CAPITAL GAINS

Motion made, and Question,
That charges to capital gains tax and corporation tax may be imposed by provisions—

(a) increasing to £1,000 the £500 mentioned in section 57(1) and (2) of the Finance Act 1971;
(b) amending section 39 of the Finance Act 1974;
(c) with respect to gilt-edged securities issued as compensation for the compulsory acquisition of shares or securities;
(d) making amendments of the law relating to the taxation of capital gains, being amendments consequential on, or connected with, amendments of the law relating to

income tax or capital transfer tax.—[Mr. Healey.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means Motions), and agreed to

31. CAPITAL TRANSFER TAX

Motion made, and Question,
That charges to capital transfer tax may be imposed by further provisions with respect to that tax.—[Mr. Healey.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means Motions), and agreed to.

32. ESTATE DUTY

Motion made, and Question,
That charges to estate duty may be imposed by provisions with respect to section 40 of the Finance Act 1930 and section 2 of the Finance Act (Northern Ireland) 1931.—[Mr. Healey.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means Motions), and agreed to.

33. STAMP DUTY (EXEMPTION FOR TRANSFERS OF LOAN CAPITAL)

Motion made, and Question,
That the following provisions shall have effect for the period beginning on 17th May 1976 and ending 31 days after the earliest of the dates mentioned in section 50(2) of the Finance Act 1973—
(1) Stamp duty shall not be chargeable on any transfer of loan capital unless—

(a) at the time when it is transferred it carries a right (exercisable then or later) of conversion into shares or other securities or to the acquistion of shares or other securities, including loan capital of the same description; or
(b) at that time or earlier it carries or has carried—

(i) a right to interest the amount of which exceeds a reasonable commercial return on the nominal amount of the capital or which falls or has fallen to be determined to any extent by reference to the results of, or of any part of a business or to the value of any property; or
(ii) a right on repayment to an amount which exceeds the nominal amount of the capital and is not reasonably comparable with what is generally repayable (in respect of a similar nominal amount of capital) under the terms of issue of loan capital listed in the Official List of The Stock Exchange.




(2) In this Resolution "loan capital" means any debenture stock, corporation stock or funded debt (by whatever name known) or any capital raised by—

(a) any body corporate or other body of persons formed or established in the United Kingdom; or
(b) the government of any country or territory within the commonwealth outside

the United Kingdom, which is borrowed, or has the character of borrowed money, whether it is in the form of stock or any other form and whether the loan thereof is secured by a mortgage, marketable security or other instrument or is unsecured; and this Resolution shall be construed as if contained in the Stamp Act 1891.
And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of section 50 of the Finance Act 1973.—[Mr. Healey.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means Motions), and agreed to.

34. STAMP DUTY (JOBBERS)

Motion made, and Question,
That provision may be made for charging additional stamp duty on certain transfers to jobbers or their nominees.—[Mr. Healey.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means Motions), and agreed to.

35. RELIEF FROM TAX (INCIDENTAL AND CONSEQUENTIAL CHARGES)

Motion made, and Question,
That it is expedient to authorise any incidental or consequential charges to any duty or tax (including charges having retrospective effect (which may arise from provisions designed in general to afford relief from taxation.—[Mr. Healey.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means Motions), and agreed to.

PROCEDURE (FUTURE TAXATION)

Motion made, and Question,
That, notwithstanding anything to the contrary in the practice of the House relating to matters which may be included in Finance Bills, any Finance Bill of the present Session may contain the following provisions taking effect in a future year—

(a) provisions about relief under section 19 or 20 of the Income and Corporation Taxes Act 1970;
(b) provisions about income tax in respect of benefits of any description derived from a person's employment or his being a director of a body corporate.—[Mr. Healey.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means Motions), and agreed to.

Bill ordered to be brought in upon the foregoing Resolutions relating to Ways and Means and the Order relating to Procedure made this day; to be brought in by the Chairman of Ways and Means, the Chancellor of the Exchequer, Mr. Michael Foot, Mr. Eric G. Varley, Mr. Albert Booth, Mr. Harold Lever, Mr. Joel Barnett, Mr. Robert Sheldon and Mr. Denzil Davies.

FINANCE

Bill to grant certain duties, to alter other duties, and to amend the law relating to the National Debt and the Public Revenue, and to make further provision in connection with Finance, presented accordingly by Mr. Robert Sheldon and read the First time; to be read a Second time tomorrow and to be printed. [Bill 123.]

BUSINESS OF THE HOUSE

Ordered,
That the consideration of Lords Amendments to Commons Amendments to the Rating (Caravan Sites) Bill [Lords] may be proceeded with at this day's sitting, though opposed, until any hour.—[Mr. Bates.]

PROTEIN DEPOSIT AND PRIVATE STORAGE AID

10.42 p.m.

The Minister of Agriculture, Fisheries and Food (Mr. Fred Peart): I beg to move,
That this House takes note of Commission Documents Nos. R/451/76 and R/452/76 relating to Protein Deposit and Private Storage Aid Proposals.

Mr. Speaker: I have to announce to the House that I have selected the amendment.

Mrs. Gwyneth Dunwoody: On a point of order, Mr. Speaker. The Documents before us are understood to be taken in conjunction with Document 539/75 of the Commission of the European Communities on a Regulation setting up a temporary system of aids to private storage of certain protein products. As this Report was thrown out by a very large majority of the European Parliament last week and automatically falls, is it not true that this debate is totally unrealistic?

Mr. Speaker: I do not know about it being realistic, but it is in order.

Mr. Peart: Our debate on these particular Documents arises from a recommendation by the Scrutiny Committee. I pay tribute, as I have on previous occasions, to the work of this Committee. The Committee shoulders a substantial responsibility in scrutinising the proposals by the Commission and reporting to the House its conclusions on them. A large proportion of the proposals which are under consideration in Brussels relate to the food and agricultural industries.
As the responsible Minister, I am therefore very much aware of the value of the Committee's Reports in drawing the attention of the House to particular

issues of importance and in stimulating discussion of them. I therefore welcome this opportunity of debating these two Documents.
The Committee's Report of 25th February—presented on this occasion by my hon. Friend the Member for Birmingham, Erdington (Mr. Silverman)—dealt with these revised proposals from the Commission concerning the use of skimmed milk powder in animal feed and the stocking of imported proteins. The Committee recommended in its Report that these revised proposals should be considered by the House. But it went on to say that it did
not consider that such further consideration"—
of the proposals—
need delay their adoption by the Council should such adoption prove necessary in the course of negotiations to achieve a satisfactory settlement on this package as a whole.
I am grateful to the Committee for the helpful and constructive attitude which it adopted on this particular point.
Of course, the normal purpose of our debates on Commission proposals is to guide the Government in their handling of the discussions on them in the Council in Brussels. On this occasion there is much to be said for the House considering the proposals, even after their adoption by the Council. The incorporation scheme is a novel temporary measure to deal with a surplus situation. It is right for this House to discuss the unfortunate predicament which made its adoption necessary and the principles which underlie it, and this discussion will be of great value to the Government in deciding their attitude to any future situation of this kind which may arise.
As the House knows, agreement on a prices package was reached in the Council on 6th March. This package included an agreement on arrangements for incorporation of skimmed milk powder and a decision in principle, pending an opinion from the European Parliament, to introduce a scheme for the storage of protein. The decisions taken include certain modifications of the proposals set out in the Documents to which the motion refers. It may, therefore, be helpful if I explain briefly the background to the proposals and indicate the developments that took place during the Council discussions.
The Commission's original proposals were included in its proposed farm price package for 1976–77. In putting forward its original proposals, the Commission drew attention to the level of the skimmed milk powder intervention stocks in the Community and to the need for a combination of measures to tackle this problem. It also emphasised the need to achieve a better balance between supply and demand in the milk products sector. Among the immediate measures suggested was the proposal that some 600,000 tonnes of skimmed milk powder should be disposed of from intervention stock for compulsory incorporation in compound feeding stuffs.
The proposal was that compound feeding stuffs should be required to include 2 per cent. by weight of such powder, which would be sold for this purpose at the same price as the cost of powder used in the production of feeding stuffs for calves in the Community. The intention here was, of course, that skimmed milk powder should be absorbed into pig and poultry feeds.
This original proposal was the subject of a detailed discussion with the interests concerned in the Community. The House examined it pretty critically in the course of its debate in February on the price package as a whole. There was also discussion in the European Parliament. A number of serious objections were raised to this original proposal and there were in particuar substantial doubts about whether it would be administratively feasible.
In the light of this reaction, the Commission came forward with the revised proposals in the two Documents which are before the House today. These envisage a system of deposits to encourage the use of skimmed milk powder in animal feed, linked with aids to provide for the storage of imported proteins.
These revised proposals, details of which are set out in the Select Committee's Report, were generally recognised as having a number of substantial advantages over the original proposal for compulsory incorporation. Instead of requiring the trade to include a specified minimum quantity of denatured skimmed milk powder in individual compound

feeding stuffs, the deposit system leaves the trade substantially free to decide how and where skimmed milk powder should be absorbed.
There is, therefore, no requirement to check that individual compounds contain a mandatory minimum percentage of powder. This flexibility means that the trade will be able to operate the system in the light of its commercial judgment and of the situation in the various markets for its products.
The parallel arrangement for the storage of imported proteins is designed to help to reduce the immediate impact on the protein market of the skimmed milk powder incorporation scheme. Here again, it is for individual traders to decide how the scheme shall operate from the point of view of their own businesses. There is no compulsion on anyone to store proteins under this arrangement.
Looked at from a United Kingdom point of view, the revised Commission proposal had another substantial advantage over the original proposal. It is based on quantities of vegetable protein and not on compound feeding stuffs as such. Since we account for a smaller proportion of the Community's consumption of vegetable proteins than of compound feeds as a whole, our industry has to absorb a smaller proportion of the total quantity of skimmed milk powder to be disposed of under the arrangement.
During the course of the discussions in the Council from 2nd to 6th March, a number of helpful modifications to the proposals set out in the document before us tonight were accepted. In particular, provision has been made for the use of skimmed milk powder simply by incorporation as an alternative to denaturing. This should be helpful from the point of view of our own trade. But, in addition, the quantity of skimmed milk powder to be disposed of was reduced from 600,000 to 400,000 tonnes and the storage arrangement was also scaled down from 400,000 to 250,000 tonnes.
Before the Council meeting I saw the trade to discuss the Commission's proposals. I explained on that occasion that I personally did not like these particular proposals and that I would have preferred that the need for them should not have arisen.

Mr. Tom Litterick: Why did my right hon. Friend accept them?

Mr. Peart: Perhaps my hon. Friend will listen. He knows full well that the Scrutiny Committee made a Report. I shall tell him why.
But the Council was faced with the need to agree some way of tackling the skimmed milk powder problem as it existed. I told the trade representatives that it might be necessary to decide on a measure along the lines of the Commission's deposit scheme in the context of other arrangements for tackling the problems in the milk sector.
As the House is aware, a number of other measures were agreed in the price package. I have in mind in particular the decision to increase the food aid programme from 55,000 tonnes to 200,000 tonnes; the deductions from the skimmed milk powder intervention price, which will have the effect of lowering returns to producers; the agro-monetary arrangements, which will further reduce real returns to milk producers in important production areas of the Community; and the agreement to decide by September on arrangements for producer co-responsibility in the milk sector to operate during the next milk year. So the hon. Member for Derbyshire, West (Mr. Scott-Hopkins) is quite right.
This is not the time to discuss these matters in detail. But the decisions reached on the skimmed milk powder incorporation and on the protein stocking arrangement have to be considered in the context of the other measures adopted. Any method of disposing of a substantial quantity of skimmed milk powder from intervention stocks would have given rise to difficulties and objections of one sort or another. It would no doubt have been preferable if the Community had not been faced with the need to take unpalatable decisions to try to deal with this problem. It is no good my hon. Friend the Member for Birmingham, Selly Oak (Mr. Litterick) laughing. I insisted that the Community dealt with this problem and reduced its surpluses. But the fact is that the problem exists and cannot be ignored.
The Government intended that the debate on the Documents which are now before us should take place on 10th

March. It is unfortunate that it did not do so, because a number of misunderstandings were created. The first was that, because the debate had not taken place, the introduction of the schemes should be delayed. As I have made clear tonight, and as the Report of the Scrutiny Committee itself makes clear, it was never intended that the debate on 10th March should precede my agreement to the schemes in Brussels. Therefore, there was no reason for the delay in the debate to delay the introduction of the schemes. Nor, as the Government have acted strictly in accordance with the Scrutiny Committee's recommendations, should there be any suggestion that the scrutiny process has in any way been undermined.

Mr. Neil Marten: I suggest that the case is rather different. The right hon. Gentleman keeps relying on the Scrutiny Committee, but the real case is that it was Parliament—both this House and the other place—which was so much against the Minister ever agreeing to it.

Mr. Peart: As the hon. Gentleman knows—he was there—I gave evidence to the Scrutiny Committee, and the Report dealing with the proceedings of the Committee makes clear:
While, therefore, the Committee report that in their opinion the two instruments raise questions of political importance and recommend that they be further considered by the House, they do not consider that such further consideration need delay their adoption by the Council should such adoption prove necessary"—

Mr. Peter Mills: rose—

Mr. Peart: May I proceed—
… should such adoption prove necessary in the course of negotiations to achieve a satisfactory settlement on the package as a whole".

Mr. Peter Mills: To be fair to the Scrutiny Committee, the Minister must admit—he will recognise his own words—that he said—this is Question No. 81—
As I have said, that is why I have laid emphasis on a voluntary scheme. I agree with you entirely. Why should we be penalised because of what has happened, not through our making but through what we have seen, the growth of surpluses? So we are anxious to explore a voluntary scheme.
Those were the Minister's words, which the Committee took and trusted.

Mr. Peart: Of course, the Committee trusted them, and my view was that, despite the inclusion of the scheme, the package which was presented to the House was a good package and should not be frustrated. That is my position. In fact, the incorporation scheme became fully effective on 1st April. The protein storage scheme is intended to come into operation on 1st May, but this may need to be reconsidered in the light of the European Parliament's unfavourable resolution.
The second misunderstanding arose from the fact that the Government made no secret of the fact that I should not be advising the House to vote against the Opposition amendment.
There were two reasons why I felt that I should not oppose that amendment. First, as I have made clear tonight, the schemes actually agreed upon in the Council were an improvement on those contained in the proposals set out in the Documents before us. The second and more important reason was that, as I have also made clear tonight, I have never pretended to like the incorporation scheme. I made this clear to the trade before I went to Brussels, and I made it clear to the House in my reply to a Question from my right hon. Friend the Member for Battersea, North (Mr. Jay) following my statement on the Brussels price package. But, although I did not like the scheme, I did not feel that I should carry this dislike to the point of blocking the CAP price package of which it formed an integral part.

Mr. Francis Pym: In view of what he has said, will the right hon. Gentleman give a categorical assurance that no scheme anything like this will ever be contemplated again, let alone agreed to by the Government?

Mr. Peart: As the right hon. Gentleman knows, this is a once-for-all scheme, and I hope that that will be the position.
May I say a word to my hon. Friends who criticise the scheme because they criticise the CAP as a whole. I understand their argument, but I am responsible for negotiating. My aim is to get the best for Britain and the best for my farmers, and to strike a fair balance between the interests of producers and of

consumers. I was convinced that the package as a whole was a good one for the United Kingdom. I recognised that, although I regretted the existence of the surplus of skimmed milk powder, I could not act as if it did not exist.

Mr. Hamish Watt: Does the right hon. Gentleman agree that it would have been far better to utilise the skimmed milk before it was made into powder by feeding it to pigs and cows at a lower cost?

Mr. Peart: The hon Gentleman has a point which I have always recognised and that is why I was critical of the scheme. I did not want to act as if the problem did not exist. Of the various ways of dealing with it, the incorporation scheme, with all its faults and disadvantages, seemed to me to be the best.
In this spirit I could have accepted the Opposition amendment had it been moved on 10th March and I shall not advise the House to vote against it if it is moved tonight. I regret the necessity for this temporary measure to deal with an existing surplus and I recognise that the long-term solution must be to tackle the surplus at its source.

11.2 p.m.

Mr. Francis Pym: I beg to move, as an amendment to the Question, to leave out 'takes note' and to insert 'disapproves' instead thereof.
I congratulate the Minister on his reappointment. His first appearance in the House as a result of that is not a particularly auspicious occasion. I support him in his remarks about the Scrutiny Committee, which is extremely valuable to the House.
In quoting and requoting the passage from the Committee's Eleventh Report, the right hon. Gentleman should acknowledge that the Committee did not in any way restrict his negotiating position. He cannot escape from his responsibility for the arrangement which he finally agreed.
We are concerned about the effect of these Instruments on the United Kingdom. We disapprove of the United Kingdom aspect. Other countries can speak for themselves but I am told that poultry producers and agriculture Ministers in other countries also disapprove. It is surprising that the scheme went


through and many of us cannot understand how it did.
The European Parliament debated the storage aspect and my hon. Friend the Member for Derbyshire, West (Mr. Scott-Hopkins) and the hon. Member for Crewe (Mrs. Dunwoody) took part in the debate. The Commissioner said in reply that it the European Parliament rejected the scheme, the Commission would reconsider it this week and put it to the Council for decision in the middle of May, which will create uncertainty. He also said that the matter would probably go before GATT, which creates another element of uncertainty.
Nobody denies that the disposal of surpluses which inevitably arise from time to time is a problem. The precise method of disposal must depend on the circumstances, but the method applied in these Documents, even with the slight amendments, is not an acceptable way for the United Kingdom to try to flatten the skimmed milk powder mountain that exists in Europe.
The United Kingdom has almost no surplus and is in no sense a contributor to the surplus. Not only do we have a shortage of milk produced at home, but we are extremely valuable customers to our European neighbours. We already take some of their surplus in the form of butter and cheese.
We could and should increase our own output of these commodities. But even if we do, this country will still remain an excellent market for food from other countries, because even the most optimistic projection of the expansion of British agriculture still leaves an enormous gap to be filled by imports. Therefore, so far from having any responsibility for the mountain, we are already contributing substantially to reducing it as an ordinary matter of trade.
Secondly, the new scheme, if it ever gets off the ground properly, will require us to put into animal feed such small reserve of powder as we have and to buy the rest across the exchanges and import a tonnage that we do not want and for which we have no need. Worse than that, it is expensive for what it is and will raise the price of feeding stuffs, which means higher prices in the shops.
Not only is this increase in price avoidable, but it is unfair. It leads me

to my third reason, that the impact will fall directly on the costs of compounders and of farmers who are not even involved in milk production. It will fall on pig producers and poultry men, and beef producers to some extent. None of these producers has any remote connection with the skimmed milk powder mountain.
What is more, our poultry men produce a significant proportion of our meat requirements at most reasonable prices, and without making any demands on the Exchequer. They make minimal demands on the European Community budget too. Eggs and poultry account for 0·47 per cent. of it, and pigs 1·33 per cent., compared with milk which takes 37·6 per cent. It is quite unjust to expect the pig man and the poultry man to rescue another sector of food production in other countries from their own excesses. The Government brought back this deal as part of their package and they have responsibility for it.
The fourth reason is a particularly bad one from the United Kingdom point of view. This country happens to be a heavy user of animal compounds, the price of which is a sensitive element in production costs, and therefore ultimately in consumer prices. These costs are already going up as the pound falls, and the effect of the scheme will bear unduly and additionally on the United Kingdom.
Fifthly, it was produced at virtually no notice and, despite what the Minister said tonight, without thorough consultations about the implications, both technical and financial. The Grain and Feed Trade Association has described the consultations as a mockery. It was asked for its views without being given the full details of the system—

Hon. Members: Oh.

Mr. Deputy Speaker (Sir Myer Galpern): Order.

Mr. Pym: Let the shouting match go on, if those involved wish.
The Council of Ministers' Regulations were not all passed until 31st March, only one day before the scheme was supposed to be in full operation. Nevertheless, deposits were paid as required from the middle of March, but even today they cannot be redeemed. I understand that no skimmed milk powder has yet been denatured and the licensing of premises


has not yet taken place. Will the Minister who winds up the debate confirm that in any case the plant capacity to denature could cope with no more than 20,000 tons in six months if it worked at full capacity? That is only half the total that we are to try to absorb. If that is true, it means that half the proposed tonnage would have to be incorporated directly.
There is another technical aspect. Representatives of the poultry producers —the British Poultry Federation and the poultry section of the National Farmers' Union—have told me today that the stipulations in Part 2 of Annex 1 of Regulation 753/76, dated 31st March, make the compound unsuitable for poultry meat production, so that it cannot be used for poultry in that form. I am further advised that very few experiments have been undertaken about the levels of skimmed milk powder in feeding stuffs and what their effect will be. That is another technical complication. There is also the problem of potential dampness and the risk of a mix of feed turning into a silo of porridge. It may be cheaper in the end not to take the 50p differential, to forgo the premium and not to incorporate the powder at all.
My final reason is that the scheme will not dispose of the existing surplus. What is the evidence that the mountain will not grow again? The way that the price review was set for the milk sector brings no disincentive for continuing the surplus across the Channel.

Mr. Ian Mikardo: Perhaps I can persuade the right hon. Gentleman to add a seventh reason and to leave pigs and poultry. I remind the House that throughout the world there are hundreds of millions of hungry and starving babies. A bit of milk powder could make the difference between life and death for them.

Mr. Pym: My answer to the hon. Gentleman is that the Community has agreed to make 200,000 tons available. There are different opinions about the amount of skimmed milk powder which the Third World and the developing world can absorb. It is not as though they all like the stuff or that it is part of their normal diet, or that it suits their digestion. However, in so far as it may

be distributed for that purpose, I am naturally in favour of such distribution.

Mr. Nicholas Winterton: Will my right hon. Friend confirm that there are surpluses of skimmed milk powder in many parts of the world—for example, America, Australia and New Zealand—and that a number of countries have offered milk powder to the Third World, only to find that it cannot take it?

Mr. Pym: I agree with my hon. Friend that surpluses exist around the world. It is a world-wide problem. The provision of food for the countries that need it can sensibly be done only on a world-wide basis. I agree with the hon. Gentleman about that.
Within the European Community there are other schemes in the melting pot to help reduce production levels in other European countries, but they are at only a preliminary stage. They are far from being agreed yet, let alone becoming effective. The surplus across the Channel will not suddenly end.
We have heard nothing from the Minister tonight that is constructive. We have heard nothing about the possibility of using liquid milk on an organised basis and saving the cost of drying it. We have heard nothing about the future. I have asked the right hon. Gentleman about future schemes and we have heard nothing about them. The Minister seems to be content with a scheme of which he disapproves, which I think is a fantastic position.
Is it still too late to adjust the price at which the powder is to be incorporated? I understand that it is to be charged at about five times its actual worth as animal food, over £300 a ton instead of about £70. The more one considers the proposition the more unreasonable a prospect it seems.

Mr. Marten: Has my right hon. Friend studied paragraphs (1) and (3) of Article 39 of the Treaty of Rome? Has he seriously considered whether the whole proposition of passing on this burden as a financial burden is ultra vires for the Community?

Mr. Pym: I was about to say that it seems that either the Community or the producers who created the surplus should


have accepted responsibility for what has happened.

Mr. Mikardo: You voted us in.

Mr. Pym: I wish that the hon. Member for Bethnal Green and Bow (Mr. Mikardo) would stop shouting. Just be patient.
The Agricultural Commissioner is trying to follow a policy of producers sharing in the responsibility of coping with the consequences of their surpluses. That is a sound principle. That was part of the stocktaking Document which the Minister welcomed, as did the Opposition. It is not clear how this scheme ties in with that strategy. It is obvious that it goes in the opposite direction.
It is difficult to understand why the right hon. Gentleman had any truck with these proposals in the first place. The right hon. Gentleman referred to the February debate. I warned him then, as did many hon. Members on both sides of the House before the review was settled, of the problems that the scheme would present. I also said that he was in danger of putting himself in a position where he would have to pay too high a price for his beef premium scheme.

Mr. Peart: Would the right hon. Genteman veto the whole package?

Mr. Pym: The right hon. Gentleman asks whether I would veto the whole package. But surely the whole package must make sense. Is it not true that the right hon. Gentleman's colleagues on the Council of Ministers also disapproved of the scheme? If that is so, why did they come to such a ridiculous arrangement—which is what this is?
I think that every hon. Member who spoke in that debate was critical of the disposal scheme. It was not as though the Minister was not warned. Indeed, the Minister himself says that he does not like it, which makes our position in the House absurd. We now have the Minister's evidence to the Select Committee on European Secondary Legislation on 13th January this year. On page 18 of the evidence he said:
I should be concerned, however, to ensure that producers are not unfairly disadvantaged because we have no significant stocks of powder.
But our producers have been disadvantaged.

On page 20, in answer to a question from my hon. Friend the Member for Devon, West (Mr. Mills), the Minister said:
As I have said, that is why I have laid emphasis on a voluntary scheme. I agree with you entirely. Why should we be penalised because of what has happened, not through our making, but through what we have seen, the growth of surpluses?".

Why indeed? Yet that is exactly what he has agreed to. What was the point in giving that evidence if the right hon. Gentleman is now attempting to go ahead in this way? The House is of the opinion that this is a bad act of government. There are still immense practical problems in getting the scheme going. Such an arrangement cannot be ended quickly enough, and nothing like it must be contemplated again.

11.18 p.m.

Mr. Douglas Jay: I support the amendment moved by the right hon. Member for Cambridgeshire (Mr. Pym).
My right hon. Friend the Leader of the House said today that it is his purpose to restore the supremacy of this House. I must say that I think he said that on the right day.
The Minister of Agriculture, Fisheries and Food has left the House in an impossible position. He admits that this is a crazy scheme which is damaging the country, he accepts an amendment condemning the scheme by this House, yet apparently he intends to leave it in legal operation in this country.
In my view the skimmed milk powder scheme is an economic and legal monstrosity. Even the NFU described it as
… ill-conceived, ill-prepared and completely unacceptable in principle".
My right hon. Friend the Minister of Agriculture spoke of the background, but he did not explain how the Commission has got us into this crazy situation. The basic reason is that the CAP sets its prices of food, and particularly of dairy products, far too high, so that consumers cannot buy what is produced. All the resulting antics follow from this. First, milk is too dear to buy, and so it is turned into butter. Then the butter is too dear and is turned into a mountain and sold cheap to the Soviet Union and other countries outside the EEC. Then prices are juggled about so that, instead


of having a butter mountain, we have a powder mountain—a mountain that is now over a million tons.
The cost of these extraordinary operations—and this is a figure given by the Minister himself—for dairy production alone in the present year will be £808 million of public money. It is not surprising that even the not exactly anti-Common Market journal the Economist recently described these dairy operations as follows:
EEC money is used to subsidise buying milk from fanners, converting it into skimmed milk powder and adding water to it, so that it can be fed to the calves of the cows that supplied it in the first place. This in turn will enable the calves to grow up so that they can produce still more subsidised milk.
That is a fair description. Having reached this stage, because the skimmed milk powder is also too dear to sell on any sort of free market, the Commission is forced to compel producers to use it. That is what the scheme means, even when, as with the British producers, they in no way contributed to the surplus or to the imbecile EEC policies which have produced this situation.
This move will gratuitously increase still further the cost of British agriculture, as the NFU and the Minister have correctly pointed out, and, before long, raise still further the cost of eggs, poultry and meat. What a piece of madness this is, at a time when incomes policy demands that we should keep down the price of food and the cost of living as much as we can.
In addition, to add insult to injury, the Minister himself went off to Brussels in the first week of March and accepted this grotesque scheme even though the House had not then debated it and even though there was a motion on the Order Paper condemning it. We were told on 16th March that the Government were prepared to accept that motion. Further, the Government apparently put the scheme into legal force in this country partly on 19th March and partly on 31st March, before we had had any opportunity to debate it.
What has become of all those wonderful promises we had in the referendum to the effect that British Ministers would have the power of a veto in Brussels if anything was contrary to British interests?

I must remind my right hon. Friend of what was said in his Government's manifesto which was posted through everyone's door during the referendum campaign. It was said:
The Minister representing Britain can veto any proposal for a new law or a new tax if he considers it to be against British interests.
What is the good of giving that undertaking in the referendum campaign and then swallowing a lunatic scheme of this kind, giving as a defence that it was part of a package and that the Minister could not help it?
The legal implications of this seem to me as disturbing as the economic consequences. Are the Government telling us that they propose to go on imposing a legal compulsion on producers even though the House of Commons is likely tonight to adopt an amendment, accepted by the Government, condemning this proposal in precise terms? If the Government are saying that they intend to defy such an amendment—and I am glad that my right hon. Friend the Leader of the House is with us—it is not a happy augury for the rule of law, quite apart from food prices. The matter cannot rest there.
I remind the Minister of what was said by the Foster Committee—which is well known to my right hon. Friend the Leader of the House—in discussing the question of secondary legislation. The Committee said:
Your Committee consider it inconceivable that any Government would act contrary to such a resolution of the House of Commons even if, which is doubted, it were legally and constitutionally entitled to do so.
We must know, tonight or very soon, what the Government conceive to be the legal position. I suggest to my right hon. Friend that we should have a statement from the Government, if possible tonight, if the House passes this amended motion invalidating these proposed Regulations, saying that the Government will cancel them forthwith and reconsider the whole matter. This whole lamentable skimmed milk fiasco only emphasises the complete unworkability of the CAP in its present form.
Thank goodness this is becoming even more widely recognised. I could quote many authorities. The editor of The Times Business News, Mr. Hugh Stephenson, on 5th April described the common


agricultural policy as "self-evident lunacy". The agricultural correspondent of the Financial Times, on 9th March, condemned the surrender of the Minister of Agriculture in the first week of March as
entailing the failure"—
for it is nothing less than failure—
of the United Kingdom Government's intention, made clear at the time of the referendum, of reforming the CAP".
If the Government intended to reform the CAP in any meaningful sense, why did they adopt this ludicrous scheme? Even the EEC's official Bureau of Consumers Unions—thank goodness it has that now—in its report of 24th February this year, said:
Consumers are therefore being charged very high prices, which lead to over-production, and then the taxpayer provides for the disposal of the surplus".
That is what has been said, not by an extremist below the Gangway but by an official body set up in Brussels.
Therefore, I hope that the House will support and accept the amendment condemning the skimmed milk powder proposals and thereby condemn the whole ridiculous common agricultural policy.

11.27 p.m.

Mr. Neil Marten: I do not wish to speak at length because many other hon. Members want to speak, but the Minister has got it wrong. He keeps relying on the Report of the Scrutiny Committee, but he should listen to the voice of this House and of the other place. He should not take the Report of the Scrutiny Committee as his defence for his action.

Mr. John Davies: My hon. Friend, like the Minister, realises that the purpose of the Scrutiny Committee is not to pass an opinion but solely to draw the attention of the House to the matter. The Committee, in its Report, refers to a "satisfactory result", but it is for the House to judge whether the result is satisfactory, not the Committee.

Mr. Marten: That bears out what I was saying. The Minister should be guided by the House. He has ignored the views of the House of Commons and of the other place, which are both very much against the proposition.
I should like to know how all this fits in with the Price Code. The compounders will be raising their prices without giving the Price Commission the statutory 28 days' notice. I raised this matter at Question Time today with the Minister responsible for prices and consumer matters. I understand that the answer is that, because the Community has made this regulation, it overrides the Price Code and the duty to give 28 days' notice to the Price Commission. I should be grateful if the Minister would say whether that is correct.
In an intervention, I asked whether this proposition was ultra vires. I read an opinion by an eminent German lawyer who specialises in Common Market law, and his view is that it is ultra vires under Article 39.1 of the Treaty of Rome because it is a cost increase on production. Article 39.1(c) provides that this sort of thing should be done only for market stabilisation, and this essentially is not market stabilisation; it is passing on the financial burden to the users. I should like to know whether this proposition is in line with GATT—I think Articles 3 and 9.

11.29 p.m.

Mr. Norman Buchan: I am puzzled. These people who were keenest to take us into the Common Market and foist this system upon us are most hysterically outraged when faced with the consequences. I found the speech of the right hon. Member for Cambridgeshire (Mr. Pym) a rather revolting exercise in political humbug.
I wish to comment on what the Minister said, and, although I had not intended to do so, I wish to refer to the Report of the Scrutiny Committee and his use of it. My right hon. Friend was being more than a little disingenuous.
The Minister referred to the virtual approval of the Committee because of the new flexibility and so on. In fact, the Committee said that its earlier concern had been about the compulsory nature of the proposals and the consequent increase in the cost of compound animal feeding stuffs. The Minister said that this concern had been met by the new flexibility and commercial judgment provisions, but the Committee has said that the new proposals meet neither of its original objections.
Though commercial judgment may be exercised on the proportion of skimmed milk powder to be included in products, instead of the mandatory 2 per cent. proportion, compulsion remains, as does the consequent increase in the cost of compound animals feeding stuffs, and both these facts are clearly stated by the Committee. It was disingenuous of the Minister to speak of a shift in the new proposals and to refer to it as a good scheme in the same breath as he was saying he would not advise us to vote against the amendment.
I feel sorry for the Minister. It is not his fault alone. He has to express the thinking of the Government on these matters. Above all, it is the fault of those who did not listen to those of us who recognised and showed what would happen and who have now been proved right. This agreement is the end of the hopes expressed during the referendum campaign and it makes a nonsense of the argument about equality of prices between Great Britain and the rest of the world and the EEC and the rest of the world. We are now seeing the economic consequences of the false propaganda spread during the referendum campaign.
It is not we alone who object to this proposal. The World Food and Agriculture Organisation has also expressed its doubts and its hope that the Community will ensure that these proposals will not work to the detriment of exporting countries and will not depress the growth of international trade. It urges that the measures should be discontinued as soon as possible. Those words are a virtual echo of the Labour Party policy document in relation to international trade and the problem of exporting countries on which we fought the February 1974 General Election.
Hitherto, imports of protein into this country have been duty-free. Now, for the first time, we shall be putting a tax on our protein intake. Yet we know that this protein is vital for our livestock industry. There is nothing in the proposals or the rest of the package that will prevent future surpluses. On the contrary, the proposals suggest that we shall end up with even greater surpluses. Again, I am not alone in suggesting this. COPA predicts 2 million tonnes'

production this year, compared with 1·9 million tonnes' production last year. Even if the figures are not precisely correct, they do not suggest a reduction.
The fury of the right hon. Member for Cambridgeshire about these proposals was rather muted, compared with some of his criticisms of my right hon. Friend, and he did not bring out the fact that eventually this cost will be borne by the consumer. The cost of feeding stuffs will be increased and this increase will have to be paid for by the livestock producers and the consumers. This is the background against which we must look at these proposals and I wish that there had been a little more comment on the specific proposals from both Front Benches.
The poultry industry has calculated that the result of these proposals will be an increase in costs of 6 per cent. to 8 per cent. to be borne by the industry and, finally, the consumer. It is an increase of about £5 million plus—anything up to £4 a tonne extra.
Since, according to the Scrutiny Committee, the importation of protein will mean that the use of the material will be regardless of cost, it cannot be said to be a commercial judgment. The most important aspect of a commercial judgment in the production of livestock is the judgment of the cost of feeding stuffs—because about 75 per cent. of the cost of producing livestock in this country is based upon the cost of feeding.
The importers and compounders are now talking in terms of 43p a tonne in administrative costs, on top of the cost of between £2 and £4. This itself is based on the intervention cost, and the intervention cost is about £360 per tonne as compared with the approximately £91 per tonne in the case of normal vegetable protein, particularly soya. It is reduced by subsidy, but we are still left with a ratio of 4:1 in terms of the cost of the compulsory additive, if it is used.
It is true that the deposit is back, but the user will pay more because there is the higher cost of the skimmed milk powder, the transport costs, and the denaturing costs; so in place of the £2 that the user will have returned he will have a loss of about £1·50. Most of this product will be pushed on to pigmeat. There are good reasons why poultry men will


find it difficult to use. There is the suggestion that over-use will taint the meat.
But it does not stop there; the costs involved are not merely technical costs. This is where speakers on both Front Benches have gone wrong in talking about 1½ per cent. and 2 per cent. food price increases. They have been referring to direct technical costs. They forget that the costs in the rest of the protein market will rise along with the rise in the cost of this product.
That, in fact, is what has happened. A producer has told me that he has been told that the cost of his vegetable protein feed has risen by £6 per tonne. That is already happening, consequent upon the skimmed milk powder aspect—and it was supposed to be a substitute for vegetable protein. It is clear that the problems of both producers and consumers arise largely from the question of costs of the kind I have described.
It does not stop there. There are the technical difficulties involved in using this material. The right hon. Gentleman talked about silo-type porridge. Somebody else referred to it as a substitute for mortar. We know that there are some difficult technical problems involved, and these mean extra costs. Finally, there is the problem of denaturing. This country has only about 50 per cent. of the denaturing facilities required for the amount it uses.
There are also crucial matters of principle. I agree with the right hon. Gentleman that the section of the livestock industry which did not cause the problem is having to bear the burden of the costs and the difficulties. It is not the pig and poultry trade but the dairy trade that has caused the problem—and I refer to the dairy trade in the rest of the European Community and not in this country. The point is that the nation that did not cause the problem—Britain—is already bearing the cost. Whereas Britain produces 15 per cent. of the Community's milk production, we have little more than 5 per cent. of the skimmed milk stock, but we shall have to bear the costs because we are one of the largest importers of vegetable protein.
Then there is the international aspect. Two years ago the Americans banned the export of soya beans. Now, we are told, they are raising with GATT strong

opposition to this scheme. They are in consultation with the EEC. It seems that the formal submission of the American protest to GATT has been delayed pending the outcome of those consultations. We talk of the Common Market and freedom of trade, but it is against that international background. Its policy conflicts with Labour's basic policy on agriculture, laid down in our policy documents in 1973 and 1974.
We could cope with the use of liquid skimmed milk but it is ridiculous that it should first be dried and then brought back into liquid. Either this scheme will solve the problem or it will not. Supposing it does not. What shall we do then? It has not properly started yet. If it does not solve the problem, tougher methods will be necessary next October. Will the Community then bring in compulsory methods, with a mandatory amount of incorporation, or will it bring in larger deposits? If the scheme is working, the Community will say "Let us continue with it."
We are in a "Catch 22" situation. We have lost the major battle and I am concerned with the future. The question of a veto has been raised. As my right hon. Friend apparently agrees with the Opposition that there should have been disapproval of these regulations, will he use the veto in October when the scheme is either toughened or continued as it is? We should like an assurance on that.
The chickens have come to roost on a mountain of skimmed milk powder. It is a nonsense of a policy; it is not the end of the mountain, for all the indications are that it will increase. Mr. Lardinois is resigning. He is lucky; it is a sensible resignation, and it would not be a bad idea if this nation resigned with him.

11.44 p.m.

Mr. Peter Mills: This is an important debate because so much is at stake. The Minister leaned heavily on the Select Committee. The Committee understood his problems in wanting to do a deal in Brussels, and took into account very strongly his firm promise that he would try to win the battle over this scheme. For that reason, I think we allowed this scheme to go forward. It is a little unfair of him now not to admit that he gave a firm promise to us.


I am afraid that when it came to the crunch in the deal, he gave way.
What has worried me for some time about the Community is that in the dealings in Brussels we do not take a stronger line in seeking the best deal for British farmers. Had the French been in this position, they would not have given way. My criticism of the Minister in this deal is that he did not win after what he had said.
I did not agree much with the speech of the hon. Member for Renfrewshire, West (Mr. Buchan), but I agree that this scheme will continue. If it is successful, if it gets rid of the mountain of skimmed milk powder, the Community will want to continue it.
The Ministers have not got to the root of the problem and dealt with those who produce for surpluses only. There is a real danger here. It is no good the Minister saying that this is once and for all. It will go on unless we deal with the real problem.
We in the South-West will suffer more than any other area because we have more stock. This will be a serious burden on all our animal production. It will also be bad for the trade. In one of its briefs, the trade says:
Secondly, it must be a matter of grave concern, as the foregoing illustrates, that British Ministers should have followed the Commission in accepting that what was essentially a practical, and indeed highly technical, problem should be the subject of a political solution taken without any prior attempt to analyse its consequences or its effects on trade and trading.
That is a serious condemnation of the Minister: It was a political deal which did not take account of the grave problems of the trade. Se we must condemn him on that as well.
Everything has been so negative. We should be taking a positive approach in the Community. I agree with what has been said about the sale of liquid milk. That is not possible because of the large volume involved, but something could be done to help. Certainly this milk powder should be sold at a lower price and farmers should accept a lower intervention price in areas of surplus. That is the positive way of dealing with the problem instead of tinkering with it.
We have heard tonight mostly from anti-Marketeers. I am proud to be a pro-Marketeer. It is easy to criticise the CAP, but we should try to rectify the mistakes rather than dump the whole arrangement. I have never believed that the CAP was static. It is flexible: we learn from our mistakes, as we do anywhere else. [Interruption.] It would be a great help if some of those who are chittering had a little skimmed milk. They would then have a better bloom on them at least.
We need to be flexible and learn from our mistakes and to deal with the problem where it exists. The Minister should go to Brussels and seek to take positive steps, by which I mean variable intervention measures to deal with certain areas within the Community which are simply producing for surplus. There might be national quotas. Certainly there should be a board to enforce the disciplines of the Milk Marketing Board. There should also be regional policies to encourage some of the small farmers who are producing simply for surplus, perhaps in Germany, to find alternative work.
I must warn the Minister that there will be a major backlash from British farmers unless this problem is dealt with now. I hope that he will go to Brussels and take energetic steps now to deal with it. This scheme is not the right way. It is bad for British agriculture and the consumer and in the long run it will be bad for the Community.

11.50 p.m.

Mrs. Gwyneth Dunwoody: May I disabuse the hon. Member for Devon, West (Mr. Mills) of any illusions he may retain about the common agricultural policy? I have had the unfortunate privilege of sitting with some of my colleagues in the front seat whilst this Whitehall farce developed, and, although people have not lost their trousers, they appear to have lost their heads.
Put brutally, there have been no structural changes inside the price provisions which will change the structure of the dairy industry inside the Common Market. Because there is no structural change or incentive to encourage anyone to lower his production of milk, we are seeing an absurd attempt to try to recover a situation which has already been abandoned by the Commission.
At the beginning of January, the Commission was asked whether, if it went


ahead with this absurd and foolhardy scheme for compulsory incorporation, this would affect the sale of protein and whether it had discussed it with the United States, which was one of the largest exporters. The Commission assured us that there would be no argument, there would be no problems with GATT, and there would be no problems of any kind. Yet, as soon as the price review was agreed, the Commission came back to the member Governments and the European Parliament and said that, because the Americans were upset, it thought that Community taxpayers should pay to have 2 per cent. of the protein put into intervention and that that price should be paid by the ordinary taxpayer.
I leave aside the fact that the CAP is completely and utterly abhorrent to me when it sets out to denature food in a world where two-thirds of the people are starving. I simply say that this is not defensible. It is not defensible in commercial terms, it is not defensible in political terms, and it also raises an absolutely frightening situation.
In the Agriculture Committee of the European Parliament we were told that this scheme had come into operation on 19th March irrespective of the views of this Parliament or any other. I have not been elected to stand by and see the imposition of unfair taxes by a non-elected group elsewhere than in Westminster, and I deeply deplore the fact that we are tonight supposedly discussing a fait accompli. The sooner that we get it straight that we cannot accept the sort of scheme brought before us in the form of a skimmed milk powder absurdity, the sooner we shall begin to reform what is a totally unacceptable common agricultural policy.

11.53 p.m.

Mr. Geraint Howells: I congratulate the Minister on his reappointment in the present Administration, and I wish him well.
With respect to a number of right hon. and hon. Members, we are not discussing whether we should be members of the European Community. We are members, and, therefore, we are discussing the common agricultural policy and the effect of the skimmed milk regulations on agriculture.
Whether or not we like the CAP, many politicians, food producers and consumers

believe that it will collapse within the next 12 months unless the leaders of the EEC countries do all in their power to unite in trying to sort out the monetary compensatory system now operating. The green pound also has bedevilled us for a long time, and it is about time that it was abolished.
We have heard that Mr. Lardinois is to resign at the end of the year because of the problems in trying to sort out the CAP. But I believe that too many Government supporters are attacking the Minister. They cannot blame the Minister for our being a member of the European Community—

Mr. J. Enoch Powell: Yes, they can.

Mr. Howells: Not the Minister himself. I feel sorry for him at times. I believe, not as a politician but as a farmer, that this year's review is the best that we have had for many years—

Mrs. Dunwoody: Ah !

Mr. Howells: If it had not been better than it was in the past two years, there would have been a shortage of beef and lamb in this country.

Mr. Deputy Speaker: Order. I must remind the hon. Member that we are not discussing the general policy of the price review and only incidental references should be made to it.

Mr. Howells: It is all part and parcel of what we are discussing because it all came in with the price review package.
I often sympathise with the Minister about the pressures brought to bear on him to accept many EEC directives which are not acceptable to him or to our agricultural industry. We have to accept many EEC directives in view of the bargaining power of the EEC in order to achieve what we want in this country. But the hon. Members who are attacking the Minister tonight did not vote with me when I divided the House on the last directive, which barred small farmers from qualifying for the new hill sheep compensatory fund. That involved a principle of the common agricultural policy.

Mr. Deputy Speaker: Order. Let me explain to the hon. Member that we are


not discussing wholly and exclusively the farm price review. I ask him to respect the wishes of the Chair.

Mr. Howells: I regret that we have to accept the principle of the skimmed milk Document. The NFU has a very good case for not accepting it. The relevant points are contained in the last two paragraphs of the NFU brief saying:
For the foregoing reasons, the NFU believes that the scheme is both ill-conceived, and ill-prepared and should have been abandoned and that any future extensions of the scheme must be resisted by the Minister. … In the view of the NFU the only practical alternative is to make SMP available at a cost which would make its use financially attractive compared with other proteins.
It has been said that we are making heavy weather of the issue before us tonight, that the price increase will be approximately 7½p per cwt, or £1·50 per tonne. That is a small amount, and in view of the excellent package that the Minister brought back from Brussels, the less we say tonight the better. Nevertheless, I support the amendment.

11.59 p.m.

Mr. James Scott-Hopkins: There can be no doubt about the feeling of the House towards these proposals. I am not certain that the Minister completely understands that the House does not sympathise with what he is doing. It is strange that we should be discussing two Documents, one of which—the protein deposit scheme—has been brought into operation in two stages, on 19th March and 31st March. The second scheme, concerning storage aid, will not come into operation as yet. The Minister and his colleagues must take decisions on it at the next agriculture meeting of the Council of Ministers some time at the beginning of May, after the Commission has revised previous proposals following their rejection by the European Parliament last Thursday—as the hon. Member for Crewe (Mrs. Dunwoody) knows, for she was there.
It is only right that the Minister should state his intentions. Here we have a Document which has been brought into operation in two stages. The deposits scheme came into operation on 19th and 31st March. I shall not venture an opinion on whether it is ultra vires, as my

hon. Friend the Member for Banbury (Mr. Marten) said, according to Article 39 of the Treaty of Rome. It is quite possible that it is. Whether it is ultra vires for Ministers to have taken a decision before they reconsulted the European Parliament, which never saw this scheme of deposits, is another question, which once again I do not think we want to argue out now. It will be argued out at a later stage, presumably within the European Parliament. There are two issues, and on both it could be ultra vires.
Nevertheless, this House is about to disapprove of this scheme. Frankly, I do not see how the Minister can continue operating it if the House disagrees with it. He must tell the House—or perhaps the Leader of the House would care to intervene in the short time available—exactly what is to happen. If the House accepts my right hon. Friend's amendment and disapproves the scheme, perforce the Minister would have to come back to the House with a different scheme and ask for approval again and this scheme could not be continued.

Mr. Arthur Lewis: The hon. Gentleman and I know that for many years we have had similar incidents in which, when the House has come to a decision and the Government have lost, the Government have accepted the decision of the House, or the Minister has resigned. Perhaps when he replies to the debate the Minister will say whether he will accept the decision of the House or resign.

Mr. Scott-Hopkins: I am grateful to the hon. Gentleman for his intervention—which was not, perhaps, quite as helpful as he thought it would be. The right hon. Gentleman will make his own statement shortly.
On the second of these proposals—and this matter was raised by the hon. Member for Crewe and by my hon. Friend the Member for Banbury—there is considerable doubt as to whether by bringing the private storage aid scheme into effect we are not contravening the regulations of the GATT. This is almost certainly true. The reason that it was brought in, as the House well knows, was in order to forestall the Americans' bringing a case immediately because the Community is breaking the GATT. In fact, it is 250,000 tonnes on which private


storage fees can be paid by the Community, and the import from the United States is just over 8 million. It is a very small proportion, but a very significant one. It is, in fact, breaching the regulations of the GATT.
However, the Minister has been hardly fair or frank with the House about the whole of this skimmed milk powder story. We have over 1 million tonnes in store. If he had accepted the Commission's proposals in the round, the whole package, there would have been a possibility that we might have been able to be constructive tonight; but he did not. He and his colleagues did not accept any kind of measures put forward by the Commission to reduce the levels of herds in Europe, which would not have affected this country at all.
The Minister accepted quite wrongfully an increase in the intervention price of dried milk. My hon. Friend the Member for Devon, West (Mr. Mills) was dead right when he said that it was not an increase in the intervention price—which the right hon. Gentleman accepted—that was needed, but that it was a doing away with the intervention price for dried milk, and the introduction of a tendering scheme, which was the Commission's proposal. That is what should have been done. If it was not a tendering scheme, as my hon. Friend the Member for Devon, West said, there sould have been a marked lowering of the intervention price.
At the Council meeting, the Minister and his colleagues accepted only part of the package proposed by the Commission. The result has been very bad for this country and it will not have any effect on an increasing amount of dried skimmed milk going into intervention. It is true that there will be a certain amount of disposal of skimmed milk under these arrangements, to the detriment of farmers in this country and with extra cost to the consumer.
I hope, therefore, that my right hon. and hon. Friends, and hon. Members opposite, will support our amendment, and, if that amendment is successful, I hope that the Minister will say what his intentions are. I do not believe that he can continue to maintain this scheme in face of the disapproval of the House. Certainly, when he goes to Brussels in May, he cannot and must not bring in

the private storage aid scheme. That is quite obvious, and I hope that he will accept the verdict of the House.

12.5 a.m.

Mr. Peart: May I reply to the debate and respond to questions and comments? It has been a useful debate, although some passions have been aroused. I understand the view taken by those of my hon. Friends who have always been critical of the CAP. [An hon. Member: "My right hon. Friend was once."] I was once, yes. But the Opposition negotiated entry into the Community, and I am rather surprised at some of their contributions to the debate.
I thank the hon. Member for Cardigan (Mr. Howells), and I agree with him that we should not exaggerate the effect of the scheme. I was asked at one stage about increases in production costs. I have a note here in reply to that which advises me that compound feed prices might increase by about 1½ per cent. in the United Kingdom during the time when the scheme is in operation, and it is expected to finish in October. This is very much less than the estimates based on the Commission's original proposal. The question of how this is reflected in the prices of individual feeds under the revised arrangements will largely be a matter for the compounders themselves to determine in the light of their commercial judgment—I argued that at the outset—and the market situation.
There has been reference to the impact on pig, poultry and egg producers. All I would say here is that it is not possible to make a precise assessment, but I believe that the effect on producers should be relatively small and temporary. One must also bear in mind—I say this to hon. Members on both sides—that the markets for pig and poultry meat are currently firm and are expected to remain so, certainly during the life of the scheme. Egg prices, too, are better than they were at this time last year.
I know and understand that strong feelings are expressed—[Interruption.] It is all very well to make speeches while sitting down. It would be better if the hon. Member for Devon, West (Mr. Mills) stood up and intervened properly, and if time were not so short I should invite him to do so. All I ask hon.


Members to do, as the hon. Member for Cardigan did—he is a farmer, and he is critical of the scheme—is not to exaggerate the situation.
The right hon. Member for Cambridgeshire (Mr. Pym) asked whether we should increase United Kingdom production of skimmed milk powder. The United Kingdom is normally self-sufficient in skimmed milk powder. Few, if any, imports of powder will be required as a result of the scheme, and these will in any case give rise to no cost to the balance of payments.
The Poultry Federation raised the point that the formulae for skimmed milk powder preparation are unsuitable for poultry. I can only say that the trade was consulted before the formulae were drawn up as a result of the original proposals and the formulae were amended. I understand that the Federation has now raised some further points on these matters. We are examining these, and if there is a case we shall suggest further modifications.
The right hon. Member for Cambridgeshire said that the Council regulations were not all passed until 31st March, one day before the scheme started. That is not so. The Council regulation was formally adopted on 15th March. I was pressed about the lack of denaturing plant, but the scheme does not require denaturing.
There have been criticisms about the nonsense of the Community milk surplus, but I thought I had made clear that the long-term solution must be to tackle the surplus at source. I have always argued that. Over and over again in the stocktaking exercise, I have pressed for a realistic price system, but I am only one member of the Council. Hon. Members must appreciate that surpluses of skimmed milk are not peculiar to the Community. New Zealand, Australia and the United States have surpluses.
The position of compounders in relation to the Price Code is important. My right hon. Friend the Secretary of State for Prices and Consumer Protection has granted an exemption from the pre-notification requirement which permits compounders to pass on increases in costs resulting from the scheme during April and to notify afterwards rather than before.

The trade has welcomed that exemption.
The hon. Member for Banbury (Mr. Marten) made a strong speech. I referred to the Scrutiny Committee's Report to demonstrate that I have not been in conflict with the Committee's procedure. I defend my acceptance of the scheme, as I defended it in my opening speech. The problems exist whether we like them or not and I believe that this scheme is the best available solution.
I was asked to make a statement about the European Parliament's criticism of the scheme. The matter will have to be carefully examined and then it is a matter for the Council. Any new proposal will be submitted to Parliament. Perhaps we shall take a different attitude, but we must wait and see what happens to the Commission's proposals. I cannot say whether I shall be in a position to veto—it would be wrong for me to say that. Many hon. Members have argued that I should have vetoed the scheme, but I believed that the package was a good one. No other Ministers vetoed the scheme. It would have been foolish to do so when we had a good package.
It being one and a half hours after the commencement of proceedings on the Motion, Mr. DEPUTY SPEAKER put the Question, pursuant to Standing Order No. 3 (Exempted business).

Question agreed to.

Main Question, as amended, put and agreed to.

Resolved,
That this House disapproves of Commission Documents Nos. R/451/76 and R/452/76 relating to Protein Deposit and Private Storage Aid Proposals.

Mr. Jay: On a point of order, Mr. Deputy Speaker. The House has now accepted the amended motion which disapproves of the proposals. Surely we must have a statement from the Minister or from the Leader of the House to explain what is now the legal position. It is inconceivable that the Minister should disregard a decision of this kind. Are we to assume that the scheme is no longer legally in operation for the United Kingdom?

Mr. Deputy Speaker: I hope that hon. Members will appreciate the position.


The Chair cannot compel any hon. Member to make a statement in the House. I hope that I shall not be bombarded with points of order, because my ruling will be stubborn—it is not a matter for the Chair.

Mr. Marten: Further to that point of order, Mr. Deputy Speaker. May I make a helpful suggestion? As the Cabinet is likely to meet tomorrow, may the matter be put on the agenda, and may we have a statement from the Leader of the House tomorrow afternoon about who rules this country?

Mr. Deputy Speaker: No doubt the Minister has heard that helpful suggestion.

Mr. Bob Cryer: On a point of order, Mr. Deputy Speaker. I shall be short, because I appreciate your courtesy in this matter.

Mr. Deputy Speaker: Points of order should always be short.

Mr. Cryer: Indeed, Mr. Deputy Speaker, but I appreciate your courtesy and concern in this matter. May we ask my right hon. Friend the Leader of the House or another Minister to say whether a statement could be made tomorrow afternoon? May we have a definite promise, now that this decision has been made? By tomorrow people outside the House will be very anxious and the legal position should be clarified.

Mr. Peart: Perhaps I may help hon. Members. Of course, the Government must consider tonight's decision. I must do that with my colleagues and others. I recognise the position.

Mr. Jay: Further to the point of order, Mr. Deputy Speaker. As my right hon. Friend has said that, can he add that a statement will be made by the Government tomorrow to tell us the conclusion of the consideration that he promised?

Mr. Peart: As I have said, we shall give consideration to this position. I cannot promise that it will be tomorrow.

Mr. Pym: Further to the point of order, Mr. Deputy Speaker. The Minister has been helpful, and we appreciate his response. But if the Government are to consider the matter, the House will wish to

know the outcome, and it would be appropriate for that to be tomorrow. The next day we rise for the Easter Recess. Many things depend on the decision. It seems to us right that there should be a statement tomorrow afternoon. I appreciate what the right hon. Gentleman said, but I hope that he can go that much further.

Mr. Nigel Spearing: Further to the point of order, Mr. Deputy Speaker. We understand that a decision on this matter is to be taken by the Council of Ministers on 2nd May. As the House has disapproved the scheme in substance, when my right hon. Friend makes a statement—we hope it will be tomorrow—will he say clearly that he will as a result disapprove the scheme when he gets to Brussels? If my right hon. Friend the Leader of the House is to make a statement, perhaps he may be reminded that there is an Early-Day Motion in the names of the members of the Scrutiny Committee criticising the totality of our procedures. Will he make a statement about that when he has the opportunity?

Mr. Deputy Speaker: There is no further reply to be made now.

RATING (CARAVAN SITES) BILL [Lords]

Lords Amendments to Commons Amendments agreed to.

ADJOURNMENT

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Thomas Cox.]

SMALL BUSINESSES (GREATER LONDON)

12.18 a.m.

Mr. Anthony Grant: I am grateful for the opportunity to raise the important subject of the burdens on small businesses in the Greater London area. Perhaps I should declare an interest, as the chairman of a small firm.
I should like first to make some general, observations which apply to small firms not only in the Greater London area but


throughout the country. I believe that the cause of small firms is as vital as any in our country and economy. They have been victims of the cult of bigness over the past quarter of a century. Small firms either grow or die. They do not stand still. It is ever more difficult these past few years for small firms to grow, and consequently all too many of them have died. Many more will, alas, do so, as witness the great increase in the number of bankruptcies and liquidations in the past two years.
The Minister of State will appreciate that I am grateful to him for being here at this late hour. I know that like me he has had a very long day. The hon. Gentleman will recall that I was responsible for small firms in the previous Administration. I am sufficiently immodest to say that I am proud that I was able to implement nearly all the major recommendations of the Bolton Report on small firms.
But since then inflation has swamped much of the good that was done. I am able to say that the Government have piled on the agony by their taxation policy and by other policies. Corporation tax policy, multi-rate VAT, capital transfer tax and national insurance contributions from the self-employed and small firms have all made the position of small firms very much worse. They have all seriously affected the vital profitability of this sector.
I recognise that there are concessions in the Budget. I pay a sincere tribute to the Minister of State for the valiant rearguard action he has fought on behalf of small firms, but it has been a rearguard action. He has secured corporation tax and capital transfer tax concessions, but it would need much greater concessions than he has obtained and the Chancellor has given to restore the position having regard to inflation, to what it was in 1973.
Concessions have been gained on IDC limits, and to some extent in the reduction of VAT, but none of these concessions should have been necessary. For two years the Chancellor was told that he was wrong in his corporation tax policy and he has now had to backtrack. He was told he was wrong in his policy on capital transfer tax and he has now had to back-track.

The Government were told that they were wrong to lower the limits for IDCs in London and the South-East, and they have now had to backtrack and raise the limits. The Chancellor was told that he was wrong to have introduced multi-rate VAT, especially the 25 per cent. rate, which was so damaging. He has had to backtrack on that. The Chancellor has decided to make a concession, but for the life of me I do not know why he could not introduce a straight 10 per cent.
How can small firms plan in such a confused and vacillating climate? What is the form-filling position? It is a burden that has to be faced by large industries, but it is completely oppressive for small firms.
Recently I sought answers from as many Ministers as I could question to discover the precise burden that is placed on small firms. I was told that 11 different forms are required by the Department of the Environment, 11 by the Department of Employment, 15 by the Department of Trade, 24 by the Department of Industry, and 56 by the Department of Energy.
The Treasury had so many different forms that it was unable to differentiate between those given to the individual and those given to companies. However, I was told that the total number of different forms issued by the Treasury is 1,866. By any standards that is oppressive and intolerable. The Minister of State is battling against the total insensitivity of the Treasury and much of Whitehall, and against the positive hostility of some sections of the Government.
In Greater London the small firms provide a better service to the consumer and a wider choice. By and large they are more efficient than their larger brethren. There are nearly 750,000 small firms in the Greater London area with fewer than five employees. They are mostly in the retail sector. There are also many small manufacturing units inside the Greater London area. Both sectors are declining seriously. At the same time, unemployment is rising seriously in an area which has hitherto enjoyed the fullest possible employment.
The increase in unemployment in the Greater London area over the last two years has been no less than 150 per


cent. There are 300,000 people now unemployed in the area. There is also depopulation from London and there is an ageing community. Of course it is not appropriate that London should become awash with motor car factories or iron ore factories. It should, as the capital city, offer a broad spread of industry and commerce and not become a vast concentration camp of Government bureaucrats and head office staff and administrators. But this is what is happening, much to the detriment of the character of London and the convenience of its citizens.
Apart from the Government's general taxation and economic policies which adversely affect small firms, there are certain problems which are especially unfortunate in London. The first is that rents and rates are exceptionally high. In particular, the business rate is much too high. Overall business rates in the last year have increased by 55 per cent. throughout the country and a lot more in London. I believe there is one area in which the rate has increased by over 200 per cent. I personally want rates to go altogether, but I believe that there is a case for relief being given to small business from the oppressive burden of the business rate.
Another point—and this is not a party political point—is the rating special surcharge imposed by the Local Government Act 1974. I know that that measure was introduced by a Conservative Government, but it was backed by the then Labour Opposition. That legislation has given rise to a number of complaints in my constituency of Harrow. It gave power to local authorities to raise a surcharge if business or commercial premises were left vacant. This has given rise to injustice, but I am afraid that local authorities are treating the matter rather too rigidly.
One case in my constituency involves the predicament of a shop that was burnt out. The owner had to wait for years for planning permission to be obtained. In the meantime, he was charged £2,000 in rating surcharge for premises which he could not use for his business.

Mr. Stephen Ross: rose—

Mr. Grant: I am afraid that I cannot give way; I have very little time left in which to conclude my remarks.
The second point I wish to mention relates to the effect on urban redevelopment. Local authorities are not taking into consideration the planning interests of small firms. Let me give an example. A few years ago a shop was bought by the council by compulsory order for the purposes of road widening. The road plans have not materialised and the shopkeeper keeps getting a lease renewal from the council at regular six-monthly intervals. The shopkeeper has refurbished the shop, but he will not expand it as he had hoped because at any moment he can be ousted from the shop with no compensation.
It is unlikely that a major industrial corporation would be treated as badly. Many of these problems would not arise if local authorities realised the vital contribution small firms made to a metropolis like London and that they have not the resources to be messed about on the scale that has happened in the last few years.
A number of positive steps could be taken. For example, in cases where, as a result of local authority-inspired urban redevelopment, neighbourhood shops were forced away, especially where shops perform vital services, the local authority could let shop premises at rates and rentals below the market rate, provided that this bore some non-penal relation to the profit levels of the shop, which could be monitored by the local authority.
Furthermore, local authorities should be made more aware of some of the wider social implications of their Utopian interventions. These affect not only small firms but the whole social well-being of communities. For example, the creation of huge GLC housing estates at Dagenham between the wars, together with lengthening life expectancy, has resulted in an ageing population. This has led to a sharp reduction in purchasing power for retailers and a marked difficulty in securing labour. The fact affects Ford as well as small firms, but small firms cannot always pay the wages paid by Ford to cover the high commuting costs.
Even with a greater awareness of the vital rôle of small firms in the Greater London area, their lot will continue to deteriorate as long as the Government pursue at national level taxation policies which destroy the incentive to save and work and to create productive assets, vital


services and jobs. There is much to be done by Government and local government in this respect.
Smaller firms deserve a better deal, in London particularly and elsewhere generally. Unless something is done to improve their lot in the Metropolis, unless the Government show a lot more understanding of their problems, it will not just be the small firm which will suffer, but the people of London as a whole.

12.31 a.m.

The Minister of State, Department of Industry (Mr. Gregor Mackenzie): I have listened to the hon. Member for Harrow, Central (Mr. Grant) tonight, as I always do, with considerable attention and with respect because he is, as he said, a former holder of the job now done by my noble Friend Lord Melchett and which I did for some considerable time. The hon. Member knows as I do the many problems there are in this job. I am glad that the hon. Member raised some of the problems of small businesses as he sees them and I hope to respond in a positive way to the points he has raised.
While the problems of small businesses have frequently been debated, it has not always been possible for us to agree on what they are or what, if anything, the Government should do about them. Nevertheless, by now at least, the Government's attitude to the small firm sector is well known. I have spelled it out time and again. We are on its side and we will do all we can to help it. We want to avoid discrimination against small businesses in all our policies, although I would be the first to admit that, like our predecessors, we do not always succeed. This is something to which we give our attention continually.
In addition, we want to foster an environment in which the small businesses can flourish alongside the large businesses. This can only be achieved by a blend of policies having a national and specifically regional impact. National policies usually get most attention in our debates. It is right, therefore, that tonight we should devote a little of our time to some of the problems arising at regional level and in particular in the Greater London area, either in spite of, or because of, the policies we are pursuing.
The hon. Member referred to industrial development certificates. The House will recall that last Thursday my right hon. Friend the Secretary of State announced a relaxation of this control in the South-East planning region by raising the threshold for which an industrial development certificate is needed from 5,000 sq. ft. to 12,500 sq. ft. I hope that the effects of this will be noticed quickly by small firms in the Greater London areas of the region in particular.
I realise that there will still be many small firms needing such certificates in the future. I emphasise that no one should be deterred from applying for a certificate since, though control remains an essential instrument of our regional policies, applications for development in Greater London by small industrialists will continue to get the careful and sympathetic treatment that they have always received.
The hon. Gentleman also raised what is for all of us the vexed question of local rates. It is a difficult matter. I know that he understands that. He has raised the specific problem of the surcharge and I will certainly convey his views to my right hon. and hon. Friends in the Department of the Environment. The Government are well aware of the difficulties facing small business men as a result of rating increases across the country, mostly caused by inflation. From reports that I have received I think that those increases are likely to be less on average this year than they were last year. The Government can take some credit for that.

Mr. Stephen Ross: May I put a point about this question of the surcharge? It is the interpretation of hardship under the Local Government Act 1974 that is causing difficulty. I entirely agree with the hon. Member for Harrow, Central (Mr. Grant). Constituents of mine are being charged for premises which are empty when that is not their fault. I ask the Government to give serious consideration to this.

Mr. Mackenzie: The hon. Member for Harrow, Central has also raised this point in earlier discussions with me. I will convey the points that have been mentioned to my right hon. and hon. Friends.
I wish to say a few words about local rates in general. We have had a measure of success in bringing down inflation. All ratepayers benefit from that. More specifically, however, we fully recognised in determining the rate support grant for 1976–77 that in a difficult period for commerce and industry generally the burden of rates is of much greater significance to the non-domestic ratepayer than ever before. This was one of the reasons why the Government held domestic rate relief at last year's levels in money terms. As a result, we have reduced domestic rate relief in real terms and left a greater percentage of the total grant available for distribution to all categories of ratepayer, including the small business man.
London business men, like others, will benefit from this. In addition, they will benefit from the larger share of the rate support grant which London will receive in 1976–77. For the future, I am sure the position of the small business will be one for consideration in the negotiations between Government and the local authority associations for the rate support grant settlement for 1977–78.
I do not deny, of course, that, despite these measures, this year's rate bill will be higher for ratepayers of all classes. However, it should not be forgotten that many small businesses and small shopkeepers in particular will still continue to benefit in London, as elsewhere, from the relief that is available on mixed hereditaments. Also, small business men can apply for a rate rebate on the domestic part of their property. The burden of commercial rates can also be eased by arranging instalment payments with local authorities, which have been asked to be sympathetic to requests for payment by this method and which I am assured are mostly prepared to allow this as a matter of discretion.
I turn now to a point which has not been raised by the hon. Gentleman but I know that it is of concern to him, namely, the question of small businesses in the regional context—the difficulties over premises which are arising, or are said to arise, or to be likely to arise, for a variety of reasons. Hon. Members are well aware, of course, that since the war there has been a very substantial decline in industrial and commercial use

in Greater London and in central London in particular. The same is also true of the inner areas of major conurbations elsewhere.
The justifiable public concern over the employment and environmental problems arising in these areas is shared by local authorities and the Government alike. Considerable attention is being paid, therefore, by local planning authorities and by the Government to the causes of decline and the measures that can be adopted to check it and studies that are at present being carried out into the problems of inner city areas include three in the London area. When we have reports on these studies, we shall be able to consider whether any policy changes may be necessary to improve matters.
Meanwhile, in London, for example, the GLC is active in trying to protect, as far as possible, industry and jobs. I have had, as the Secretary of State has had, many conversations with leaders of the council and with London Members, including the hon. Gentleman, about this, and the policies proposed by the GLC for regeneration of the Covent Garden area include the prevention of change of use of industrial floorspace to other uses, and put emphasis on retaining small industries and workshops traditionally associated with the area.
There are other instances I could describe, but I shall not go on as time is short. I hope though that, without sounding complacent. I have shown there is a real awareness of this particular problem and that efforts are being made to deal with it.
I know that the hon. Gentleman has been concerned about a number of other issues. I have referred to one or two of them, as he has. I do not pretend that we have been able to deal with all of them.
There are other problems. It is still very difficult, for example, for manufacturers in London to recruit and retain skilled labour. The small manufacturer employing just a few skilled people can be more at risk from casual losses than large. The problem is one well recognised by Government and is not specific to the Greater London area. It is therefore being tackled on a very wide front.
So far as the burden of costs is concerned, I fear that it just has to be


accepted that London is an expensive place in which to run a business of any kind. Regrettable though it may be, this must bear hard on small firms without any resources behind them. Their only real hope of relief from these burdens is a long-term one, and lies in checking this spiral of costs attributable to London's size and congestion, which a somewhat smaller London, if planning aims are realised, might bring about.
I want to finish on an encouraging note. The hon. Gentleman, when he last spoke on this issue some time ago and again tonight, said that I should raise the problem with the Chancellor. I am obliged to him for recognising that I have done so. My right hon. Friend in his Budget has responded in a very positive way to the wishes of the sector in the areas of corporation tax and capital transfer tax. Having read the papers and views of the organisations concerned, I can say that his proposals have rightly been widely welcomed. By the change in tax allowances on the pension provisions which self-employed people make for themselves he has done something useful for this class of business man.
The promised study of medium-term finance will, I know, bear the needs of small firms in mind, and if anything can be done about an investment reserve scheme, this will be particularly useful

for enterprises which rely largely on retained profits to finance growth. The extension of stock appreciation relief for a further two years and the assurances about clawback will be more valuable, perhaps, to small firms even than to large.
Perhaps more important, however, the new and imaginative approach to the next phase of the battle against inflation—which is the main cause of small firms' problems—which we are determined to win is of special importance to the sector which suffers most from being dragged along on the coat-tails of massive wage increases in large firms. All this must put the final nail in the lie that this Government are against small business. The Budget is ample proof that we are prepared to do everything sensible and necessary to help small firms. We always have and we always will. Indeed as the Secretary of State for Industry said last Thursday, I shall be announcing some further measures soon. I hope that these measures will be of considerable value to the small firms sector.
We are all indebted to the right hon. Gentleman for raising these problems. We shall certainly take cognisance of them.

Question put and agreed to.

Adjourned accordingly at seventeen minutes to One o'clock.

BUDGET RESOLUTIONS AND ECONOMIC SITUATION

Division Lists Nos. 108 to 110

[See cols. 1045 to 1049.]

Division No. 108
AYES
10.0 p.m.


Abse, Leo
Ennals, David
Lewis, Ron (Carlisle)


Allaun, Frank
Evans, Fred (Caerphilly)
Lipton, Marcus


Anderson, Donald
Evans, Gwynfor (Carmarthen)
Litterick, Tom


Archer, Peter
Evans, Ioan (Aberdare)
Lomas, Kenneth


Armstrong, Ernest
Evans, John (Newton)
Loyden, Eddie


Ashley, Jack
Ewing, Harry (Stirling)
Luard, Evan


Ashton, Joe
Faulds, Andrew
Lyon, Alexander (York)


Atkins, Ronald (Preston N)
Fernyhough Rt Hon E.
Lyons, Edward (Bradford W)


Atkinson, Norman
Fitch, Alan (Wigan)
Mabon, Dr J. Dickson


Bagier, Gordon A. T.
Fitt, Gerard (Belfast W)
McCartney, Hugh


Barnett, Guy (Greenwich)
Flannery, Martin
McElhone, Frank


Barnett, Rt Hon Joel (Heywood)
Fletcher, Ted (Darlington)
McGuire, Michael (Ince)


Bates, Alf
Foot, Rt Hon Michael
Mackenzie, Gregor


Bean, R. E.
Ford, Ben
Mackintosh, John P.


Benn, Rt Hn Anthony Wedgwood
Forrester, John
Maclennan, Robert


Bennett, Andrew (Stockport N)
Fowler, Gerald (The Wrekin)
McMillan, Tom (Glasgow C)


Bidwell, Sydney
Fraser, John (Lambeth, N'w'd)
McNamara, Kevin


Bishop, E. S.
Freeson, Reginald
Madden, Max


Blenkinsop, Arthur
Garrett, John (Norwich S)
Magee, Bryan


Boardman, H.
Garrett, W. E. (Wallsend)
Mahon, Simon


Booth, Rt Hon Albert
George, Bruce
Mallalieu, J. P. W.


Boothroyd, Miss Betty
Gilbert, Dr John
Marks, Kenneth


Bottomley, Rt Hon Arthur
Ginsburg, David
Marquand, David


Boyden, James (Bish Auck)
Golding, John
Marshall, Dr Edmund (Goole)


Bradley, Tom
Gould, Bryan
Marshall, Jim (Leicester S)


Brown, Hugh D. (Provan)
Gourlay, Harry
Mason, Rt Hon Roy


Brown, Robert C. (Newcastle W)
Graham, Ted
Maynard, Miss Joan


Brown, Ronald (Hackney S)
Grant, George (Morpeth)
Meacher, Michael


Buchan, Norman
Grant, John (Islington C)
Mellish, Rt Hon Robert


Buchanan, Richard
Grocott, Bruce
Mikardo, Ian


Callaghan, Rt Hon J. (Cardiff SE)
Hamilton, James (Bothwell)
Millan, Bruce


Collaghan, Jim (Middleton &amp; P)
Hardy, Peter
Miller, Dr M. S. (E Kilbride)


Campbell, Ian
Harper, Joseph
Miller, Mrs Millie (Ilford N)


Canavan, Dennis
Harrison, Walter (Wakefield)
Molloy, William


Cant, R. B.
Hattersley, Rt Hon Roy
Morris, Alfred (Wythenshawe)


Carmichael, Neil
Hatton, Frank
Morris, Charles R. (Openshaw)


Carter-Jones, Lewis
Hayman, Mrs Helene
Morris, Rt Hon J. (Aberavon)


Cartwright, John
Healey, Rt Hon Denis
Moyle, Roland


Castle, Rt Hon Barbara
Heffer, Eric S.
Mulley, Rt Hon Frederick


Clemitson, Ivor
Hooley, Frank
Murray, Rt Hon Ronald King


Cocks, Michael (Bristol S)
Horam, John
Newens, Stanley


Cohen, Stanley
Howell, Rt Hon Denis
Noble, Mike


Coleman, Donald
Hoyle, Doug (Nelson)
Oakes, Gordon


Colquhoun, Ms Maureen
Huckfield, Les
Ogden, Eric


Concannon, J. D.
Hughes, Rt Hon C. (Anglesey)
O'Halloran, Michael


Conian, Bernard
Hughes, Mark (Durham)
Orbach, Maurice


Cook, Robin F. (Edin C)
Hughes, Robert (Aberdeen N)
Orme, Rt Hon Stanley


Corbett, Robin
Hughes, Roy (Newport)
Ovenden, John


Cox, Thomas (Tooting)
Hunter, Adam
Owen, Dr David


Craigen, J. M. (Maryhill)
Irvine, Rt Hon Sir A. (Edge Hill)
Padley, Walter


Crawshaw, Richard
Irving, Rt Hon S. (Dartford)
Palmer, Arthur


Cronin, John
Jackson, Colin (Brighouse)
Park, George


Crosland, Rt Hon Anthony
Jackson, Miss Margaret (Lincoln)
Parker, John


Cryer, Bob
Janner, Greville
Parry, Robert


Cunningham, G. (Islington S)
Jay, Rt Hon Douglas
Pavitt, Laurie


Cunningham, Dr J. (Whiteh)
Jeger, Mrs Lena
Peart, Rt Hon Fred


Dalyell, Tam
Jenkins, Hugh (Putney)
Pendry, Tom


Davidson, Arthur
Jenkins, Rt Hon Roy (Stechford)
Perry, Ernest


Davies, Bryan (Enfield N)
John, Brynmor
Prentice, Rt Hon Reg


Davies, Denzil (Llanelli)
Johnson, James (Hull West)
Price, C. (Lewisham W)


Davies, Ifor (Gower)
Johnson, Walter (Derby S)
Price, William (Rugby)


Davis, Clinton (Hackney, C)
Jones, Alec (Rhondda)
Radice, Giles


Dean, Joseph (Leeds W)
Jones, Barry (East Flint)
Rees, Rt Hon Merlyn (Leeds S)


de Freitas, Rt Hon Sir Geoffroy
Jones, Dan (Burnley)
Richardson, Miss Jo


Delargy, Hugh
Judd, Frank
Roberts, Albert (Normanton)


Dell, Rt Hon Edmund
Kaufman, Gerald
Roberts, Gwilym (Cannock)


Dempsey, James
Kelley, Richard
Robertson, John (Paisley)


Doig, Peter
Kerr, Russell
Robinson, Geoffrey


Dormand, J. D.
Kilroy-Silk, Robert
Roderick, Caerwyn


Douglas-Mann, Bruce
Kinnock Neil
Rodgers, George (Chorley)


Duffy, A. E. P.
Lambie, David
Rodgers, William (Stockton)


Dunn, James A.
Lamborn, Harry
Rooker, J. W.


Dunnett, Jack
Lamond, James
Rose, Paul B.


Dunwoody, Mrs Gwyneth
Latham, Arthur (Paddington)
Ross, Rt Hon W. (Kilmarnock)


Eadie, Alex
Leadbitter, Ted
Rowlands, Ted


Edge, Geoff
Lee, John
Sandelson, Neville


Edwards, Robert (Wolv SE)
Lestor, Miss Joan (Eton & Slough)
Sedgemore, Brian


English, Michael
Lewis, Arthur (Newham N)
Selby, Harry







Shaw, Arnold (Ilford South)
Thomas, Dafydd (Merioneth)
White, Frank R. (Bury)


Sheldon, Robert (Ashton-u-Lyne)
Thomas, Jeffrey (Abertillery)
White, James (Pollok)


Shore, Rt Hon Peter
Thomas, Mike (Newcastle E)
Whitehead, Phillip


Short, Rt Hon E. (Newcastle C)
Thomas, Ron (Bristol NW)
Whitlock, William


Short, Mrs Renée (Wolv NE)
Thorne, Stan (Preston South)
Wigley, Dafydd


Silkin, Rt Hon John (Deptford)
Tierney, Sydney
Willey, Rt Hon Frederick


Silkin, Rt Hon S. C. (Dulwich)
Tinn, James
Williams, Alan (Swansea W)


Sillars, James
Tomlinson, John
Williams, Alan Lee (Hornch'ch)


Silverman, Julius
Tomney, Frank
Williams, Rt Hon Shirley (Hertford)


Skinner, Dennis
Torney, Tom
Wilson, Alexander (Hamilton)


Small, William
Tuck, Raphael
Wilson, Rt Hon H. (Huyton)


Smith, John (N Lanarkshire)
Varley, Rt Hon Eric G.
Wilson, William (Coventry SE)


Snape, Peter
Wainwright, Edwin (Dearne V)
Wise, Mrs Audrey


Spearing, Nigel
Walden, Brian (B'ham, L'dyw'd)
Woodall, Alec


Spriggs, Leslie
Walker, Harold (Doncaster)
Woof, Robert


Stallard, A. W.
Walker, Terry (Kingswood)
Wrigglesworth, Ian


Stott, Roger
Ward, Michael
Young, David (Bolton E)


Strang, Gavin
Watkins, David



Strauss, Rt Hon G. R.
Watkinson, John
TELLERS FOR THE AYES:


Summerskill, Hon Dr Shirley
Weetch, Ken
Mr. John Ellis and


Swain, Thomas
Weitzman, David
Mr. David Stoddart.


Taylor, Mrs Ann (Bolton W)
Wellbeloved, James





NOES


Adley, Robert
Eyre, Reginald
Jenkin, Rt Hn P. (Wanst'd & W'df'd)


Aitken, Jonathan
Fairbairn, Nicholas
Jessel, Toby


Alison, Michael
Fairgrieve, Russell
Johnson Smith, G. (E Grinstead)


Amery, Rt Hon Julian
Farr, John
Johnston, Russell (Inverness)


Arnold, Tom
Fell, Anthony
Jones, Arthur (Daventry)


Atkins, Rt Hon H. (Spelthorne)
Finsberg, Geoffrey
Jopling, Michael


Awdry, Daniel
Fisher, Sir Nigel
Joseph, Rt Hon Sir Keith


Bain, Mrs Margaret
Fletcher, Alex (Edinburgh N)
Kaberry, Sir Donald


Banks, Robert
Fletcher-Cooke, Charles
Kellett-Bowman, Mrs Elaine


Bell, Ronald
Fookes, Miss Janet
Kershaw, Anthony


Bennett, Dr Reginald (Fareham)
Forman, Nigel
Kilfedder, James


Berry, Hon Anthony
Fowler, Norman (Sutton C'f'd)
Kimball, Marcus


Biffen, John
Fox, Marcus
King, Evelyn (South Dorset)


Biggs-Davison, John
Fraser, Rt Hon H. (Stafford & St)
King, Tom (Bridgwater)


Blaker, Peter
Freud, Clement
Kitson, Sir Timothy


Body, Richard
Fry, Peter
Knight, Mrs Jill


Boscawen, Hon Robert
Galbraith, Hon T. G. D.
Knox, David


Bottomley, Peter
Gardiner, George (Reigate)
Lamont, Norman


Bowden, A. (Brighton, Kemptown)
Gardner, Edward (S Fylde)
Lane, David


Boyson, Dr Rhodes (Brent)
Gilmour, Rt Hon Ian (Chesham)
Langford-Holt, Sir John


Braine, Sir Bernard
Gilmour, Sir John (East Fife)
Latham, Michael (Melton)


Brittan, Leon
Glyn, Dr Alan
Lawrence, Ivan


Brocklebank-Fowler, C.
Godber, Rt Hon Joseph
Lawson, Nigel


Brotherton, Michael
Goodhart, Philip
Lester, Jim (Beeston)


Brown, Sir Edward (Bath)
Goodhew, Victor
Lloyd, Ian


Bryan, Sir Paul
Goodlad, Alastair
Loveridge, John


Buchanan-Smith, Alick
Gorst, John
Luce, Richard


Buck, Anthony
Gow, Ian (Eastbourne)
McAdden, Sir Stephen


Budgen, Nick
Gower, Sir Raymond (Barry)
MacCormick, Iain


Bulmer, Esmond
Grant, Anthony (Harrow C)
McCrindle, Robert


Burden, F. A.
Gray, Hamish
Macfarlane, Neil


Butler, Adam (Bosworth)
Griffiths, Eldon
MacGregor, John


Carlisle, Mark
Grimond, Rt Hon J.
Macmillan, Rt Hon M. (Farnham)


Chalker, Mrs Lynda
Grist, Ian
McNair-Wilson, M. (Newbury)


Churchill, W. S.
Grylls, Michael
McNair-Wilson, P. (New Forest)


Clark, Alan (Plymouth, Sutton)
Hall, Sir John
Madel, David


Clark, William) Croydon S)
Hall-Davis, A. G. F.
Marshall, Michael (Arundel)


Clarke, Kenneth (Rushcliffe)
Hamilton, Michael (Salisbury)
Marten, Neil


Clegg, Walter
Hampson, Dr Keith
Mates, Michael


Cockcroft, John
Hannam, John
Mather, Carol


Cooke, Robert (Bristol W)
Harrison, Col Sir Harwood (Eye)
Maude, Angus


Cope, John
Harvie Anderson, Rt Hon Miss
Maudling, Rt Hon Reginald


Cormack, Patrick
Hastings, Stephen
Mawby, Ray


Corrie, John
Heath, Rt Hon Edward
Maxwell-Hyslop, Robin


Costain, A. P.
Henderson, Douglas
Mayhew, Patrick


Crawford, Douglas
Heseltine, Michael
Meyer, Sir Anthony


Critchley, Julian
Hicks, Robert
Miller, Hal (Bromsgrove)


Crouch, David
Higgins, Terence L.
Mills, Peter


Crowder, F. P.
Holland, Philip
Miscampbell, Norman


Davies, Rt Hon J. (Knutsford)
Hooson, Emlyn
Mitchell, David (Basingstoke)


Dean, Paul (N Somerset)
Hordern, Peter
Moate, Roger


Dodsworth, Geoffrey
Howe, Rt Hon Sir Geoffrey
Monro, Hector


Douglas-Hamilton, Lord James
Howell, David (Guildford)
Montgomery, Fergus


Drayson, Burnaby
Howell, Ralph (North Norfolk)
More, Jasper (Ludlow)


du Cann, Rt Hon Edward
Howells, Geraint (Cardigan)
Morgan-Giles, Rear-Admiral


Durant, Tony
Hunt, David (Wirral)
Morris, Michael (Northampton S)


Edwards, Nicholas (Pembroke)
Hurd, Douglas
Morrison, Charles (Devizes)


Elliott, Sir William
Hutchison, Michael Clark
Morrison, Hon Peter (Chester)


Emery, Peter
Irving, Charles (Cheltenham)
Mudd, David


Ewing, Mrs Winifred (Moray)
James, David
Neave, Airey







Nelson, Anthony
Rost, Peter (SE Derbyshire)
Thatcher, Rt Hon Margaret


Neubert, Michael
Royle, Sir Anthony
Thompson, George


Newton, Tony
Sainsbury, Tim
Thorpe, Rt Hon Jeremy (N Devon)


Nott, John
St. John-Stevas, Norman
Townsend, Cyril D.


Onslow, Cranley
Scott, Nicholas
Trotter, Neville


Oppenheim, Mrs Sally
Scott-Hopkins, James
Tugendhat, Christopher


Osborn, John
Shaw, Giles (Pudsey)
van Straubenzee, W. R.


Page, Rt Hon R. Graham (Crosby)
Shaw, Michael (Scarborough)
Vaughan, Dr Gerard


Parkinson, Cecil
Shelton, William (Streatham)
Viggers, Peter


Pattle, Geoffrey
Shepherd, Colin
Wainwright, Richard (Colne V)


Penhaligon, David
Shersby, Michael
Wakeham, John


Percival, Ian
Silvester, Fred
Walder, David (Clitheroe)


Peyton, Rt Hon John
Sims, Roger
Walker, Rt Hon P. (Worcester)


Pink, R. Bonner
Sinclair, Sir George
Walker-Smith, Rt Hon Sir Derek


Price, David (Eastleigh)
Skeet, T. H. H.
Wall, Patrick


Prior, Rt Hon James
Smith, Dudley (Warwick)
Wallers, Dennis


Pym, Rt Hon Francis
Spence, John
Warren, Kenneth


Raison, Timothy
Spicer, Michael (S Worcester)
Watt, Hamish


Rathbone, Tim
Sproat, Iain
Weatherill, Bernard


Rawlinson, Rt Hon Sir Peter
Stainton, Keith
Wells, John


Rees, Peter (Dover & Deal)
Stanbrook, Ivor
Welsh, Andrew


Rees-Davies, W. R.
Stanley, John
Whitelaw, Rt Hon William


Reid, George
Steen, Anthony (Wavertree)
Wiggin, Jerry


Renton, Rt Hon Sir D. (Hunts)
Stewart, Donald (Western Isles)
Wilson, Gordon (Dundee E)


Renton, Tim (Mid-Sussex)
Stewart, Ian (Hitchin)
Winterton, Nicholas


Ridley, Hon Nicholas
Stokes, John
Wood, Rt Hon Richard


Ridsdale, Julian
Stonehouse, Rt Hon John
Young, Sir G. (Ealing, Acton)


Rifkind, Malcolm
Stradling Thomas, J.
Younger, Hon George


Rippon, Rt Hon Geoffrey
Tapsell, Peter



Roberts, Michael (Cardiff NW)
Taylor, R. (Croydon NW)
TELLERS FOR THE NOES:


Roberts, Wyn (Conway)
Taylor, Teddy (Cathcart)
Mr. W. Benyon and


Ross, Stephen (Isle of Wight)
Tebbit, Norman
Mr. Spencer le Marchant.


Rossi, Hugh (Hornsey)
Temple-Morris, Peter





Division No 109]
AYES
[10 13 p m


Abse, Leo
Craigen, J. M. (Maryhill)
Garrett, W. E. (Wallsend)


Allaun, Frank
Crawshaw, Richard
George, Bruce


Anderson, Donald
Cronin, John
Gilbert, Dr John


Archer, Peter
Crosland, Rt Hon Anthony
Ginsburg, David


Armstrong, Ernest
Cryer, Bob
Golding, John


Ashley, Jack
Cunningham, G. (Islington S)
Gould, Bryan


Ashton, Joe
Cunningham, Dr J. (Whiten)
Gourlay, Harry


Atkins, Ronald (Preston N)
Dalyell, Tam
Graham, Ted


Atkinson, Norman
Davidson, Arthur
Grant, George (Morpeth)


Bagier, Gordon A. T.
Davies, Bryan (Enfield N)
Grant, John (Islington C)


Barnett, Guy (Greenwich)
Davies, Denzil ([...])
Grocott, Bruce


Barnett, Rt Hon Joel (Heywood)
Davies, Ifor (Gower)
Hamilton, James (Bothwell)


Bales, Alf
Davis, Clinton (Hackney, C)
Hardy, Peter


Bean, R. E.
Dean, Joseph (Leeds W)
Harper, Joseph


Benn, Rt Hn Anthony Wedgwood
da Freitas, Rt Hon Sir Geoffrey
Harrison, Walter (Wakefield)


Bennett, Andrew (Stockport N)
Delargy, Hugh
Hattersley, Rt Hon Roy


Bidwell, Sydney
Dell, Rt Hon Edmund
Hatton, Frank


Bishop, E. S.
Dempsey, James
Hayman, Mrs Helene


Blenkinsop, Arthur
Doig, Peter
Healey, Rt Hon Denis


Boardman, H.
Douglas-Mann, Bruce
Heffer, Eric S.


Booth, Rt Hon Albert
Duffy, A. E. P.
Hooley, Frank


Boothroyd, Miss Betty
Dunn, Jamas A.
Hooson, Emlyn


Bottomley, Rt Hon Arthur
Dunnett, Jack
Horam, John


Boyden, James (Bish Auck)
Dunwoody, Mrs Gwyneth
Howell, Rt Hon Denis


Bradley, Tom
Eadie, Alex
Howells, Geraint (Cardigan)


Brown, Hugh D. (Proven)
Edge, Geoff
Hoyle, Doug (Nelson)


Brown, Robert C. (Newcastle W)
Ellis, John (Brigg & Scun)
Huckfield, Les


Brown, Ronald (Hackney S)
English, Michael
Hughes, Rt Hon C. (Anglesey)


Buchen, Norman
Ennals, David
Hughes, Mark (Durham)


Buchanan, Richard
Evans, Fred (Caerphilly)
Hughes, Robert (Aberdeen N)


Callaghan, Rt Hon J. (Cardiff SE)
Evans, Gwynfor (Carmarthen)
Hughes, Roy (Newport)


Callaghan, Jim (Middleton & P)
Evans, Ioan (Abordare)
Hunter, Adam


Campbell, Ian
Evans, John (Newton)
Irvine, Rt Hon Sir A. (Edge Hill)


Canavan, Dennis
Ewing, Harry (Stirling)
Irving, Rt Hon S. (Dartford)


Cant, R. B.
Faulds, Andrew
Jackson, Colin (Brighouse)


Carmichael, Neil
Fernyhough, Rt Hon E.
Jackson, Miss Margaret (Lincoln)


Carter-Jones, Lewis
Fitch, Alan (Wigan)
Janner, Greville


Cartwright, John
Fitt, Gerard (Belfast W)
Jay, Rt Hon Douglas


Castle, Rt Hon Barbara
Flannery, Martin
Jeger, Mrs Lena


Clemitson, Ivor
Fletcher, Ted (Darlington)
Jenkins, Hugh (Putney)


Cocks, Michael (Bristol S)
Foot, Rt Hon Michael
Jenkins, Rt Hon Roy (Stechford)


Cohen, Stanley
Ford, Ben
John, Brynmor


Coleman, Donald
Forrester, John
Johnson, James (Hull West)


Colquhoun, Ms Maureen
Fowler, Gerald (The Wrekin)
Johnson, Walter (Derby S)


Concannon, J. D.
Fraser, John (Lambeth, N'w'd)
Johnston, Russell (Inverness)


Conian, Bernard
Freeson, Reginald
Jones, Alec (Rhondda)


Cook, Robin F. (Edin C)
Freud, Clement
Jones, Barry (East Flint)


Corbett, Robin
Garrett. John (Norwich S)
Jones, Dan (Burnley)







Judd, Frank
Murray, Rt Hon Ronald King
Stallard, A. W.


Kaufman, Gerald
Newens, Stanley
Stoddart, David


Kerr, Russell
Noble, Mike
Stott, Roger


Kilroy-Silk, Robert
Oakes, Gordon
Strang, Gavin


Kinnock Neil
Ogden, Eric
Strauss, Rt Hon G. R.


Lambie, David
O'Halloran, Michael
Summerskill, Hon Dr Shirley


Lamborn, Harry
Orbach, Maurice
Swain, Thomas


Lamond, James
Orme, Rt Hon Stanley
Taylor, Mrs Ann (Bolton W)


Latham, Arthur (Paddington)
Ovenden, John
Thomas, Dafydd (Merioneth)


Leadbitter, Ted
Owen, Dr David
Thomas, Mike (Newcastle E)


Lee, John
Padley, Walter
Thomas, Ron (Bristol NW)


Lestor, Miss Joan (Eton & Slough)
Palmer, Arthur
Thorne, Stan (Preston South)


Lewis, Arthur (Newham N)
Park, George
Thorpe, Rt Hon Jeremy (N Devon)


Lewis, Ron (Carlisle)
Parker, John
Tierney, Sydney


Lipton, Marcus
Parry, Robert
Tinn, James


Litterick, Tom
Pavitt, Laurie
Tomlinson, John


Lomas, Kenneth
Peart, Rt Hon Fred
Tomney, Frank


Loyden, Eddie
Pendry, Tom
Torney, Tom


Luard, Evan
Penhaligon, David
Tuck, Raphael


Lyon, Alexander (York)
Perry, Ernest
Varley, Rt Hon Eric G.


Lyons, Edward (Bradford W)
Prentice, Rt Hon Reg
Wainwright, Edwin (Dearne V)


Mabon, Dr J. Dickson
Price, C. (Lewisham W)
Wainwright, Richard (Colne V)


McCartney, Hugh
Price, William (Rugby)
Walden, Brian (B'ham, L'dyw'd)


McElhone, Frank
Radice, Giles
Walker, Harold (Doncaster)


McGuire, Michael (Ince)
Rees, Rt Hon Merlyn (Leeds S)
Walker, Terry (Kingswood)


Mackenzie, Gregor
Richardson, Miss Jo
Ward, Michael


Mackintosh, John P.
Roberts, Albert (Normanton)
Watkins, David


Maclennan, Robert
Roberts, Gwilym (Cannock)
Watkinson, John


McMillan, Tom (Glasgow C)
Robinson, Geoffrey
Weetch, Ken


McNamara, Kevin
Roderick, Caerwyn
Weitzman, David


Madden, Max
Rodgers, George (Chorley)
Wellbeloved, James


Magee, Bryan
Rooker, J. W.
White, Frank R. (Bury)


Mahon, Simon
Rose, Paul B.
White, James (Pollok)


Mallalieu, J. P. W.
Ross, Stephen (Isle of Wight)
Whitehead, Phillip


Marks, Kenneth
Ross, Rt Hon W. (Kilmarnock)
Whitlock, William


Marquand, David
Rowlands, Ted
Wigley, Dafydd


Marshall, Dr Edmund (Goole)
Sandelson, Neville
Willey, Rt Hon Frederick


Marshall, Jim (Leicester S)
Sedgemore, Brian
Williams, Alan (Swansea W)


Mason, Rt Hon Roy
Shaw, Arnold (llford South)
Williams, Rt Hon Shirley (Hertford)


Maynard, Miss Joan
Sheldon, Robert (Ashton-u-Lyne)
Wilson, Alexander (Hamilton)


Meacher, Michael
Shore, Rt Hon Peter
Wilson, Rt Hon H. (Huyton)


Mellish, Rt Hon Robert
Short, Rt Hon E. (Newcastle C)
Wilson, William (Coventry SE)


Mikardo, Ian
Short, Mrs Renée (Wolv NE)
Wise, Mrs Audrey


Millan, Bruce
Silkin, Rt Hon John (Deptford)
Woodall, Alec


Miller, Dr M. S. (E Kilbride)
Silkin, Rt Hon S. C. (Dulwich)
Woof, Robert


Miller, Mrs Millie (llford N)
Silverman, Julius
Wrigglesworth, Ian


Molloy, William
Skinner, Dennis
Young, David (Bolton E)


Morris, Alfred (Wythenshawe)
Small, William



Morris, Charles R. (Openshaw)
Smith, John (N Lanarkshire)
TELLERS FOR THE AYES:


Morris, Rt Hon J. (Aberavon)
Snape, Peter
Mr Thomas Cox and


Moyle, Roland
Spearing, Nigel
Mr J. D. Dormand


Mulley, Rt Hon Frederick
Spriggs, Leslie





NOES


Brotherton, Michael
Kilfedder, James
Thompson, George


Crawford, Douglas
MacCormick, Iain
Watt, Hamish


Ewing, Mrs Winifred (Moray)
Maxwell-Hyslop, Robin
Wilson, Gordon (Dundee E)


Gilmour, Sir John (East Fife)
Mudd, David



Gray, Hamish
Reid, George
TELLERS FOR THE NOES:


Grimond, Rt Hon J.
Sillars, James
Mrs. Margaret Bain and


Henderson, Douglas
Stewart, Donald (Western Isles)
Mr. Andrew Welsh


Hutchison, Michael Clark
Stonehouse, Rt Hon John





Division No. 110.
AYES
10.26 p.m.


Abse, Leo
Bishop, E. S.
Carmichael, Neil


Allaun, Frank
Blenkinsop, Arthur
Carter-Jones, Lewis


Anderson, Donald
Boardman, H.
Cartwright, John


Archer, Peter
Booth, Rt Hon Albert
Castle, Rt Hon Barbara


Armstrong, Ernest
Boothroyd, Miss Betty
Clemitson, Ivor


Ashley, Jack
Bottomley, Rt Hon Arthur
Cocks, Michael (Bristol S)


Ashton, Joe
Boyden, James (Bish Auck)
Cohen, Stanley


Atkins, Ronald (Preston N)
Brown, Hugh D. (Provan)
Coleman, Donald


Atkinson, Norman
Brown, Robert C. (Newcastle W)
Colquhoun, Ms Maureen


Bagier, Gordon A. T.
Brown, Ronald (Hackney S)
Concannon, J. D.


Barnett, Guy (Greenwich)
Buchan, Norman
Conian, Bernard


Barnett, Rt Hon Joel (Heywood)
Buchanan, Richard
Cook, Robin F. (Edin C)


Bates, Alf
Callaghan, Rt Hon J. (Cardiff SE)
Corbett, Robin


Bean, R. E.
Callaghan, Jim (Middleton & P)
Craigen, J. M. (Maryhill)


Benn, Rt Hn Anthony Wedgwood
Campbell, Ian
Crawshaw, Richard


Bennett, Andrew (Stockport N)
Canavan, Dennis
Cronin, John


Bidwell, Sydney
Cant, R. B.
Crosland, Rt Hon Anthony







Cryer, Bob
Jenkins, Hugh (Putney)
Price, C. (Lewisham W)


Cunningham, G. (Islington S)
Jenkins, Rt Hon Roy (Stechford)
Price, William (Rugby)


Cunningham, Dr J. (Whiteh)
John, Brynmor
Radice, Giles


Dalyell, Tam
Johnson, James (Hull West)
Rees, Rt Hon Merlyn (Leeds S)


Davidson, Arthur
Johnson, Walter (Derby S)
Rees-Davies, W. R.


Davies, Bryan (Enfield N)
Jones, Alec (Rhondda)
Richardson, Miss Jo


Dairies, Denzil (Llanelli)
Jones, Barry (East Flint)
Roberts, Albert (Normanton)


Davies, Ifor (Gower)
Jones, Dan (Burnley)
Roberts, Gwilym (Cannock)


Davis, Clinton (Hackney, C)
Judd, Frank
Robertson, John (Paisley)


Dean, Joseph (Leeds W)
Kaufman, Gerald
Robinson, Geoffrey


de Freitas, Rt Hon Sir Geoffrey
Kerr, Russell
Roderick, Caerwyn


Delargy, Hugh
Kilroy-Silk, Robert
Rodgers, George (Chorley)


Dell, Rt Hon Edmund
Kinnock Neil
Rooker, J. W.


Dempsey, James
Lambie, David
Rose, Paul B.


Doig, Peter
Lamborn, Harry
Ross, Rt Hon W. (Kilmarnock)


Douglas-Mann, Bruce
Lamond, James
Rowlands, Ted


Duffy, A. E. P.
Latham, Arthur (Paddington)
Sandelson, Neville


Dunn, James A.
Leadbitter, Ted
Sedgemore, Brian


Dunnett, Jack
Lee, John
Shaw, Arnold (llford South)


Dunwoody, Mrs Gwyneth
Lestor, Miss Joan (Eton & Slough)
Sheldon, Robert (Ashton-u-Lyne)


Eadie, Alex
Lewis, Arthur (Newham N)
Shore, Rt Hon Peter


Edge, Geoff
Lewis, Ron (Carlisle)
Short, Rt Hon E. (Newcastle C)


Ellis, John (Brigg & Scun)
Lipton, Marcus
Short, Mrs Renée (Wolv NE)


English, Michael
Litterick, Tom
Silkin, Rt Hon John (Deptford)


Ennals, David
Lomas, Kenneth
Silkin, Rt Hon S. C. (Dulwich)


Evans, Fred (Caerphilly)
Loyden, Eddie
Sillars, James


Evans, Ioan (Aberdare)
Luard, Evan
Silverman, Julius


Evans, John (Newton)
Lyon, Alexander (York)
Skinner, Dennis


Ewing, Harry (Stirling)
Lyons, Edward (Bradford W)
Small, William


Faulds, Andrew
Mabon, Dr J. Dickson
Smith, John (N Lanarkshire)


Fernyhough, Rt Hon E
McCartney, Hugh
Snape, Peter


Fitch, Alan (Wigan)
McElhone, Frank
Spearing, Nigel


Fitt, Gerard (Belfast W)
McGuire, Michael (Ince)
Spriggs, Leslie


Flannery, Martin
Mackenzie, Gregor
Stallard, A. W.


Fletcher, Ted (Darlington)
Mackintosh, John P.
Stoddart, David


Foot, Rt Hon Michael
Maclennan, Robert
Stott, Roger


Ford, Ben
McMillan, Tom (Glasgow C)
Strang, Gavin


Forrester, John
McNamara, Kevin
Strauss, Rt Hon G. R.


Fowler, Gerald (The Wrekin)
Madden, Max
Summerskill, Hon Dr Shirley


Fraser, John (Lambeth, N'w'd)
Magee, Bryan
Swain, Thomas


Freeson, Reginald
Mahon, Simon
Taylor, Mrs Ann (Bolton W)


Garrett, John (Norwich S)
Mallalieu, J. P. W.
Thomas, Mike (Newcastle E)


Garrett, W. E. (Wallsend)
Marks, Kenneth
Thomas, Ron (Bristol NW)


George, Bruce
Marquand, David
Thorne, Stan (Preston South)


Gilbert, Dr John
Marshall, Dr Edmund (Goole)
Tierney, Sydney


Ginsburg, David
Marchall, Jim (Leicester S)
Tinn, James


Golding, John
Mason, Rt Hon Roy
Tomlinson, John


Gould, Bryan
Maynard, Miss Joan
Torney, Tom


Gourlay, Harry
Meacher, Michael
Tuck, Raphael


Graham, Ted
Mellish, Rt Hon Robert
Varley, Rt Hon Eric G.


Grant, George (Morpeth)
Mikardo, Ian
Wainwright, Edwin (Dearne V)


Grant, John (Islington C)
Millan, Bruce
Walden, Brian (B'ham, L'dyw'd)


Grocott, Bruce
Miller, Dr M. S. (E Kilbride)
Walker, Harold (Doncastor)


Hamilton, James (Bothwell)
Miller, Mrs Millie (llford N)
Walker, Terry (Kingswood)


Hardy, Peter
Molloy, William
Ward, Michael


Harper, Joseph
Morris, Alfred (Wythenshawe)
Watkins, David


Harrison, Walter (Wakefield)
Morris, Charles R. (Openshaw)
Watkinson, John


Hattersley, Rt Hon Roy
Morris, Rt Hon J. (Aberavon)
Weetch, Ken


Hatton, Frank
Moyle, Roland
Weitzman, David




Wellbeloved, James


Hayman, Mrs Helene
Mulley, Rt Hon Frederick
White, Frank R. (Bury)


Healey, Rt Hon Denis
Murray, Rt Hon Ronald King
White, James (Pollok)


Heffer, Eric S.
Newens, Stanley
Whitehead, Phillip


Hooley, Frank
Noble, Mike
Whitlock, William


Horam, John
Oakes, Gordon
Willey, Rt Hon Frederick


Howell, Rt Hon Denis
Ogden, Eric
Williams, Alan (Swansea W)


Hoyle, Doug (Nelson)
O'Halloran, Michael
Williams, Rt Hon Shirley (Hertford)


Huckfield, Les
Orbach, Maurice
Wilson, Alexander (Hamilton)


Hughes, Rt Hon C. (Anglesey)
Orme, Rt Hon Stanley
Wilson, Rt Hon H. (Huyton)


Hughes, Mark (Durham)
Ovenden, John
Wilson, William (Coventry SE)


Hughes, Robert (Aberdeen N)
Owen, Dr David
Wise, Mrs Audrey


Hughes, Roy (Newport)
Palmer, Arthur
Woodall, Alec


Hunter, Adam
Park, George
Woof, Robert


Irvine, Rt Hon Sir A. (Edge Hill)
Parker, John
Wrigglesworth, Ian


Irving, Rt Hon S. (Dartford)
Parry, Robert
Young, David (Bolton E)


Jackson, Colin (Brighouse)
Pavitt, Laurie



Jackson, Miss Margaret (Lincoln)
Peart, Rt Hon Fred
TELLERS FOR THE AYES:


Janner, Greville
Pendry, Tom
Mr. J. D. Donnand and


Jay, Rt Hon Douglas
Perry, Ernest
Mr. Thomas Cox.


Jeger, Mrs Lena
Prentice, Rt Hon Reg








NOES


Crawford, Douglas
MacCormick, Iain
Wainwright, Richard (Colne V)


Evans, Gwynfor (Carmarthen)
Mudd, David
Watt, Hamish


Ewing, Mrs Winifred (Moray)
Penhaligon, David
Wigley, Dafydd


Freud, Clement
Reid, George
Wilson, Gordon (Dundee E)


Henderson, Douglas
Ross, Stephen (Isle of Wight)



Hicks, Robert
Stewart, Donald (Western Isles)
TELLERS FOR THE NOES:


Hooson, Emlyn
Thomas, Dafydd (Merioneth)
Mrs. Margaret Bain and


Howells, Geraint (Cardigan)
Thompson, George
Mr. Andrew Welsh.


Kilfedder, James
Thorpe, Rt Hon Jeremy (N Devon)